Easiest Way to Draw Fibonacci LevelsMy entire trading strategy is built around how I draw and utilize Fibonacci levels. I use Fibonacci levels to determine precise entry, target, and stop loss placement in combination with other technical analysis methods. The biggest problem I see with a lot of traders is that they do not know how to draw Fibonacci levels properly. So I will show you my method and you will see that the market really seems to react to it. If you have any questions please post a comment below.
Step 1: Go to the Monthly timeframe and pick the previous month's fully formed candle. If the previous month's candle does not have a large body relative to the rest of the order flow, then it is perfectly acceptable to go back two months and pick that candle instead.
Step 2: If it is a Bullish candle draw your Fibonacci levels from the high of the candle to its low. If it is a Bearish candle draw your Fibonacci levels from the low of the candle to its high.
Step 3: Switch to a lower timeframe (daily chart and lower) and observe how price reacts to the Fibonacci levels as support / resistance
Step 4: The following month re-draw your Fibonacci levels if required
Tips:
1)On my charts I include the 1.272 and 1.414 levels as well as the 2.0 level. These are not automatically visible
2)You can also 'reverse' the levels (simply draw them in the opposite direction or use the reverse function in the Fibonacci tool's settings) if the current month's price action violates the 0 level. This does not happen often.
Example: AUDUSD. I have drawn the Fibonacci levels from the low to the high of the October Monthly Candle
Now look at the same Fibonacci levels on the Hourly Timeframe. I have highlighted clear rejections in November of Fibonacci levels that can be used as entry points and the elongated rectangle shows a clear demand region near the 1.00 level.
