How do you determine your Fibonacci levels?

First off fibonacci is a self-fulfilling trader “prophecy” – meaning it works because lots of traders look at them and think that they work. With that in mind here are some quick and dirty rules we use to determine fibonacci levels:

1) first off I only use the three major levels – 38.2%, 50% and 61.8% – because those are the levels most other traders look at.

2) the larger the timeframe, the better. This means 1h and above.

3) I connect the highs/lows, NOT the close/open (so the tips of the wicks, not where the body starts/stops)

4) the more obvious the high/low the better. This means there has not been a major correction in the middle of a high/low. For example, open up a daily chart and look at 10/2/09 – 10/26/09. That whole time period is one steady uptrend. It is obvious where every trader should place the high and the low. And because Fibonacci is self-fulfilling the more obvious to everyone the better, right?

5) Connect those highs/lows. You are done!

For a good example of this in action check out this chart from 10/16/09 (click chart to enlarge).

FAQ for Free Forex Signals

See how from the bottom (0% – bottom yellow line) to the top (100% – top yellow line) there is very little in the way of correction or retracement? It is obvious what the high/lows are in this scenario and that is when fibonacci works best. And, what do you know? We got a great bounce of the 38.% retracement level for 90+ pips!

Join the Discussion!

  1. Profile photo of Tamil Selvan
    Tamil Selvan
    June 11, 2011 at 13:47Reply

    I am really happy to see your explanation of each topic regarding Forex principles for easy trading.
    If each and every beginner or trader goes through your explanations and trade through proper money management I think there is no way to lose your money in Forex market

  2. daniels goodluck
    November 30, 2011 at 08:01Reply

    Thanks alot, i would put it to use.

  3. Profile photo of ranvijoy kumar
    ranvijoy kumar
    July 7, 2012 at 00:39Reply

    I am really happy to how it work. Its great job.

  4. Fred
    July 12, 2012 at 08:07Reply

    thanks Mark

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