Working with Fibonacci Retracement tool

Welcome back after holiday!

I was reading about Fibonacci Retracement tool today. Like when to use it, how to use it etc. So here I picked to learn more about it--

Currency pair: AUD/CHF
Time frame: 1h
Chart created at: 8:20 p.m (GMT +6)

This tool works with trending market. That is, a volatile environment is ideal for this. Here you'll first need to find a swing high and swing low. if you're able to identify then you're ready to draw the Fibonacci Retracement level on the chart.

Now, idea is.... you're going to retracement point within a trend..... that is, in a trend, sometimes price holds a level for some time and goes the opposite direction before reversing/retracing the original trend in place. Now if we get the retracement levels, we can enter the trend. As most of the traders follow this tool, this is self full-filling.

To draw the levels in chart, just pick the tool, in an uptrend put your mouse to previous swing low, click and hold mouse pointer, drag it to the swing high. There you are... software will automatically paint the levels.


Swing high was at:0.95320 on 27th December 2011 at 7.00 p.m
Retracement levels are 0.94734 (23.6%), 0.94295 (38.2%), 0.93957 (50%), 0.93635 (61.8%)
Swing low was at: 0.92623 on 19th December 2011 at 7.00 a.m

Now wait for the price to bounce back.....

Actually these levels work as either support or resistance level according to the direction of market movement. Wait to see what happen next.

Look, price retraced back just hitting the level at 0.94734 (23.6%).... It went all the way through to above previous swing high level....If I could have enter at that level, I would have gained more that 80 pips..

Now, I don't know whether I've used it properly..... I've done it following a tutorial.... whatever, it worked here somehow... If anybody has any suggestion, please come forward....

It'll help my newbie readers to learn and it'll help me as well. I was not within reach of internet... for this I couldn't enter into the trade, otherwise it could have been a live experience of gaining pips with the help of fibonacci tool.



Like every other tools, it's not always give accurate result. So have a nice profitable prediction, some additional tools are needed. For now, I don't have any idea about which tool might be good for Fibonacci Retracement tool. I'll post here as soon as I get an idea....