We can’t stop talking about Fibonacci Retracement, because they are important and they work in trading. If you learn to plot them on the charts properly, the minimum thing they can do for you is that they show you the next destination of the markets and the movement size, after a trade setup. And, this is is important for traders.
Before, you read the below article, please make sure to read these articles, if you are new to trading and Fibonacci and you have’t already read our Fibonacci related articles:
- Fibonacci Trading – How To Use Fibonacci in Forex Trading
- How to Add Tools Like Gann and Fibonacci to MT4 Line Studies Toolbar
- Fibonacci Trading Strategy After Sideways Market Breakout
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In this video, I have explained how I have plotted the Fibonacci Retracement levels on CHF/JPY weekly time frame. As you see on the below chart, CHF/JPY has been moving sideways almost since 2016. I have recently talked about this currency pair in more detail in this article as well: JPY Currency Pairs
There is a strong resistance level at the top of this sideways market. This strong resistance level has prevented the price from going up since 2016.
What happens if this market breaks above the resistance level, and how far the price will go up?
The other important question is: Why should this market break above this resistance level?
Fibonacci Retracement levels can answer the first question in the best possible way. First, please see how this market has been moving sideways for several years:
Now, let’s plot Fibonacci Retracement levels on the this market to see what will happen if this market breaks above the range resistance. As you can see, I have plotted the Fibonacci Retracement levels from the high price at point #1 to the low price at point #2. If you do so, the 161.80% Fibonacci Retracement will be placed at the top and above the resistance level. It means, if the market breaks above the sideways market resistance, it will go up and the next direction of this market will be the 161.80% level:
Now, let’s see how to plot the Fibonacci Retracement levels when we think that a support level breakout is on the way.
I have talked about USD/CHF and its support level breakout in several different articles:
- Support Level Breakout Trading Strategy Explained
- Taking Short Positions Explained
- Fibonacci Trading Strategy After Sideways Market Breakout
To know how I have plotted the Fibonacci Retracement levels on the below chart, you need to read the above articles and watch their related videos.
