<img height="1" width="1" style="display:none;" alt="" src="https://dc.ads.linkedin.com/collect/?pid=663889&amp;fmt=gif https://dc.ads.linkedin.com/collect/?pid=663889&amp;fmt=gif ">


Open Account in 4 easy steps

Select your Investment Strategies

Open Managed Discretionary Account

Open Executing Broker Account

Live Account

Open Account Today!

Dec 30, 2018 5:26:23 PM

Investment |

What is a Fibonacci Retracement in forex trading?

A Fibonacci retracement is a technical analysis tool used by traders to understand when to place and close trades or when to place stops and limits. Fibonacci retracements depend on the mathematical principles of the Golden ratio14, and they are used to find areas of resistance and support in the primary movements of assets.

To calculate Fibonacci retracement levels, traders draw six lines across the asset’s price chart: one line would be at the highest point; one would be at the lowest point, one at the midpoint and three at 61.8%, 38.2% and 23.6%. According to the golden ratio rule, these points should be the ones at which significant levels of support and resistance should be detected.

How to Use Fibonacci Retracements in Trading

Here are the steps involved in making use of Fibonacci retracements for forex and CFD trading:

1. When applying the Fibonacci tool to a downtrend, use it to the start of the move to the end (the tool is always used from the left to the right), like so:

Fibonacci tool to a downtrend

2. With an upward moving trend, the tool should be applied at the bottom and end at the top. Once again, it is applied from the left to the right, as follows:

3. The Fibonacci retracement levels will automatically appear once you have used the tool. They appear in the form of percentages of the total move.
4. You can use the prices at 50%, 61.8% or 32.8% as your potential long entry levels.
5. To choose the correct level to enter based on your strategy, you need to:
  • Aggressively enter as the price reaches each level and place a stop loss at the other side of the Fibonacci level;

  • Wait until the price finds support or resistance15 at these levels and then enter.

Fibonacci Mistakes that need to be avoided

Here are some common mistakes that even very technical traders make at times. You need to avoid these at all costs as they can mess your position and timing up:

  • Do not mix your Fibonacci reference points. Keep them consistent and you should not go from a candle’s wick to a candle’s body16 as this can create a misanalysis.

  • Do not ignore any long-term trends. The major mistake that new traders do is that they look at significant moves which have occurred in the short term, and this can lead to a lot of misanalyses. By looking at the long term trends, one can use the Fibonacci retracements in the right direction of momentum.

  • Do not rely on Fibonacci alone as there is harm in doing this. Make use of additional analytical tools as this will increase your chances of making a good trade. You need the confirmation to allow you to move ahead.

  • Do not make use of Fibonacci retracement levels over short intervals. Applying it over short intervals is quite ineffective, and it will make it difficult for the trader to decide what levels can be traded.

Claim the Free Guide

Read the full article and more download our FREE
Insiders Guide to Forex and CFDs. That’ll Help to Improve Your Forex & CFD Trading Skills and Assist You to Make Consistent returns!

Related blog articles

Aug 7, 2020 7:37:20 PM

Audited Returns for 2019-2020

Our MDA Model Portfolio 2019-2020 financial year audit has just been completed and we are delighted to share the results.

Our performance of our swing strategy for the 2019-2020 financial year:

(All Returns are Net of Fees)

Swing Strategy  28.57%

Get exclusive access to our Auditors report for 2019-2020 by completing your details below.



Audit Concept. Word on Folder Register of Card Index. Selective Focus.

Jul 25, 2019 2:34:26 PM

Audited Returns for 2018-2019

Our MDA Model Portfolio's 2018-2019 financial year audit has just been completed and we are delighted to share the results.

Our performance varied between strategies, overall a solid result

The following Strategies have been Audited below for the 2018-2019 financial year:

(All Returns are Net of Fees)

Swing Strategy  39.87%

High Growth Strategy 83.84%

Multi-Strategy 8.30%

Alpha Growth Strategy 39.87%

Get exclusive access to our Auditors report for 2018-2019 by completing your details below.


Apr 12, 2019 10:08:47 AM

Investment Seminar Melbourne

Our first Investment Seminar was held in Melbourne on the 10th of April 2019 at the RAVC Club.

We had a great turnout for the event with the support of Robert DiPierdomenico (Dipper) and our shareholders. An informative and social night with strong interest in our Managed Investments from the attendee's below is a few photo's of the evening.




Investment, Portfolio | 5 MIN READ