subject: Advanced Fibonacci Trading Techniques [print this page] Fibonacci Trading is a term used to describe the application of Fibonacci retracements and extensions, an incredible way to gather valuable data on vital resistance and support lines.
Fibonacci retracements and extensions have proven to be immensely dependable and reliable, ever since entering into the world of trading, which is why they are often considered very valuable by traders.
However, laying the retracements and extensions is a manual process which is ultimately at the discretion of the trader. This can lead to problems in situations when there are multiple high and low prices, and laying the Fibonacci analysis on top of a candlestick chart can be inconclusive.
Under these circumstances, traders may not feel confidence in their analysis. However, the use of Fibonacci clusters is a simple and effective solution to this problem.
By projecting the resistance and support lines, Fibonacci retracements and extensions provide invaluable data to a trader. If applied correctly, the Fibonacci analysis can determine extremely accurate resistance and support lines but if applied incorrectly a trader could create problems.
Practical Application of Fibonacci Trading
Utilizing Fibonacci analysis incorrectly is very possible when multiple high and low points are present on a candlestick chart. Under such circumstances, it may be difficult to ascertain which two points to settle on.
Making a decision about which points to pick is enormously important because it has a huge impact on where the Fibonacci analysis will detect resistance and support lines, and if carried out inaccurately there is the possibility of playing the market to false resistance and support lines.
Under these circumstances, a trader can use Fibonacci clusters to solve the problem. Although they may not provide data as accurate as a single retracement or extension, Clusters are very simple to employ and they can be relied upon.
The premise of Fibonacci clusters is very easy to understand: a trader should simply lay multiple retracements and extensions over a single candlestick chart so that the resistance and support lines can be determined. This strategy should only be used when there are a great number of high and low prices to pick from, and when this is the case a trader should pick several prices and apply the Fibonacci analysis to them.
By this method, average points of resistance and support can be identified, and it is far superior to simply guessing two prices and utilizing only one retracement or extension.
The result may look a bit confusing because there will be lots of information on the candlestick chart, but a trader should be able to distinguish points where several retracements or extensions line up and agree on a point of resistance or support.
With all of this having been carried out, it is quite expected that these clusters will behave as reliable points of resistance and support and they can be trusted by traders. A price should behave as expected by either rebounding or breaking through when it approaches one of these clusters.
When a trader is uncertain of where to place a retracement or extension, This strategy works remarkably well, and it generally also works accurately as an indication technique.
Fibonacci trading is really an art form, one that can be easily understood with just a few tips and specific examples. For a complete free tool set visit our site http://www.fibonaccigenius.com
