Finance Press - Daily financial articles from world

The art of using Fibonacci retracements and extensions is known as Fibonacci Trading, an amazing method of gathering precise data on vital resistance and support lines.

The art of using Fibonacci retracements and extensions is known as Fibonacci Trading, an amazing method of gathering precise 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.

Considering the uncertainty, a feeling of confusion or a lack of confidence can occur. However, with knowledge of Fibonacci clusters the problem can be overcome with a fix that is clear and effective.

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

There is a distinct possibility of using Fibonacci analysis incorrectly when there are number of high and low points on a candlestick diagram. This can make it hard to decide which two points to choose from.

Choosing the correct two is very important because it has a big impact on where the Fibonacci analysis will detect resistance and support lines and if done inaccurately a trader might end up playing the market to false resistance and support lines.

In a situation such as this a trader can use Fibonacci clusters as a solution. Clusters are very simple to employ and although they may not provide data as accurate as a single retracement or extension, they are very reliable.

The concept behind Fibonacci clusters is straight forward: a trader should arrange multiple retracements and extensions over a single candlestick chart in order to ascertain where the resistance and support lines are placed. This strategy should only be utilized when there are many high and low prices to choose from, and when this situation arises a user should select several prices and apply the Fibonacci analysis to them.

This will help determine average points of resistance and support and is much better than simply guessing two prices and using 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.

This strategy works extremely well when a trader does not know where to place a retracement or extension, and on the average it 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

< Prev		Next >