HOW TO USE FIBONACCI LIKE A PRO #part1Hi there! Bolu here
The Fibonacci tool is one of the most popular tools on trading view and many traders use Fibonacci on their charts.
FIBS are a major part of my trading system as you can see on this chart, i use it all the time, as I have to know what structure is saying on major and minor structure to aid my analysis and entry/exit confirmations.
I will be sharing how I use my FIBONACCI tool in this post and you can take some notes and add to your trading plan if you want.
BASICS OF FIBONACCI
In mathematics, the Fibonacci sequence is a sequence in which each number is the sum of the two preceding ones. Numbers that are part of the Fibonacci sequence are known as Fibonacci numbers, commonly denoted Fn . The sequence commonly starts from 0 and 1, although some authors start the sequence from 1 and 1 or sometimes (as did Fibonacci) from 1 and 2. Starting from 0 and 1, the first few values in the sequence are:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144.
The history of Fibonacci is all over the internet. My Job here is to show you how it can be used to your trading advantage.
I majorly use the FIB retracement & FIB extension tool. Trading-view provides a whole lot of other types of FIBs, but they are not a part of my trading system, so i only focus on what is relevant to my Trading plan by keeping it simple.
HOW TO USE THE FIBS
It is imperative to understand that Fibonacci retracement is a tool used to measure the retrace of a counter trend based on the current trend.e.g, After a downtrend formation, how far the correction would go would be measured with the FIBs.
while the Fibonacci extension tool is used to measure the 'length' of the continuation of that trend and is mostly used as Take profit levels
IT CAN ONLY BE USED IN A TRENDING MARKET. You need a valid Uptrend point or Downtrend point to draw out your FIBd]
Drawing out FIBs on the chart is a 3step process
STEPS TO DRAW FIBS
STEP 1 : SPOT A VALID BOS.
STEP 2 : IDENTIFY POINT A – POINT B OF THE IMPULSE MOVE .
STEP 3: DRAG FIB FROM THE HIGH TO THE LOW / LOW TO THE HIGH .
I changed the default settings that the FIBS came with on Trading-view and replace the numbers and colors.
Each FIB Percentage level means something unique on the charts and that helps with understanding what the trend is doing.
The retracement levels are used to see how strong the pullback phase is. Understanding the strength of the pullback is one of the most important things to know in the trend . I will probably make another post on 'Trend strength Analysis'..., You can put it in the comments if you would like to study it with me. Now, back to our FIBs.
Every FIB level is uniquely important and useful. The FIB Level that aligns with a key level of structure is High Probability.
In the Part 2 of this post, i would share the 'secret sauce' of the FIB retracement levels and how they can be used in both Major and Minor Structure.
