Price Action: Fibonacci Retracement (Part 9)

Price Action: Fibonacci Retracement (Part 9)

One of the skills that I still use often in the process of analysis and planning is Fibonacci Retracement. In this article, I will only focus on my experience and use of Fibonacci with Gold, not talking about numerical sequences or the magic of Fibonacci.


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How to use Fibonacci retracement

For me, Fibonacci (Fibo) only has 5 key milestones including 0 – 0.382 – 0.5 – 0.618 – 1. In which 0.5 will be the center, where the price is balanced. I also don’t care if I should draw from 0 => 1 or 1 => 0 because everything is symmetric about the 0.5 line. So whether you draw the Fibonacci retracement from the top down or the bottom up, it’s still the same.

How to use Fibonacci retracement
How to use Fibonacci retracement

Why is it called Fibo retracement? Because the market never goes straight in 1 way. Any uptrend or downtrend needs to have retracements. And I use Fibo retracement to make trading plans at these pullbacks.

Fibonacci retracement with GOLD

As for gold, I will divide it into Downtrend and Uptrend. Because there is a slight difference, it should be divided to use.

Draw Fibo with Gold in a downtrend

Use the H4 candlestick chart (Tradingview) and draw Fibo Retracement as follows.

(A) Starting point: The opening price of the first red candle starts a downtrend. Not the highest price!!!!!

(B) Pull down right through at the lowest price of this bearish wave.

Drawing Fibo with Gold in a downtrend
Drawing Fibo with Gold in a downtrend

So the 3 price zones you need to pay attention to prepare for a SELL order will be:

– 1815 corresponds to the 0.382 zone.

– 1825 corresponds to the 0.5 zone.

– and 1837 corresponds to the 0.618 zone.

Why do I draw Fibo like that?

(i) With gold, I will draw Fibo on the H4 candlestick chart and the starting point will be the opening price of the first candle that started the bearish wave. Not the highest price. Because this is my experience.

(ii) Why drag to the area (B). Since here, the price made 2 bottoms so it is possible to create a bounce.

(iii) Why do you choose the opening price of the candle as the starting point of Fibo while the lowest price as the ending point? As my experience indicates so.

And here is the result. Gold price recovered to the 0.382 Fibo zone then continued to fall again.

Gold price returned to Fibo 0.382
Gold price returned to Fibo 0.382

Ok! Let’s take 1 more example. I will draw one more time and you can check the rest on Tradingview yourself.

(1) The price fell and broke out of the previous Key Level => the market formed a downtrend.

(2) Draw the Fibo starting from the opening price of the first red candle in this bearish wave.

(3) Drag the Fibo to the lowest point of the wave.

Draw Fibonacci retracement in a bearish wave
Draw Fibonacci retracement in a bearish wave

After that, we have 3 zones to wait for SELL orders:

– 1807 corresponds to Fibo 0.382

– 1815 corresponds to Fibo 0.5

– 1823 corresponds to Fibo 0.618

Result: The price reacted at Fibo 0.382 and Fibo 0.5

The price retraced to the Fibo zone then fell again
The price retraced to the Fibo zone then fell again

Draw Fibo with Gold in an uptrend

Why is there a difference between Uptrend and Downtrend when drawing Fibonacci?

Answer: Gold’s downtrend is usually a full-power drop. So traders can lose all of their money before there are pullbacks.

On the contrary, in an uptrend, gold is well more educated. It increases then pulls back to run the stop loss of traders then continues to rise… That’s why I will use Fibo retracement to predict the pullback zone.

It’s still the H4 candlestick chart on Tradingview. Draw a Fibonacci retracement in the bullish wave.

Draw Fibo retracement in an uptrend
Draw Fibo retracement in an uptrend

(A) Starting point: The closing price of the candle that started the bullish wave.

(B) Drag to the highest price of this wave. The retracement price zones to note will be:

– 1836 at Fibo 0.382

– 1824 at Fibo 0.5

– and 1811 at Fibo 0.618

And the result: The price fell and returned to the 0.5 Fibo zone, then bounced back.

Result
Result

In the next bullish wave, I will do as above. Starting from the trigger candle for this bullish wave, drag the Fibo to the highest price (highest high).

In an uptrend, I will draw Fibo with each bullish wave
In an uptrend, I will draw Fibo with each bullish wave

Just like that, we can repeat every bullish wave to get the price retracement zones.

Draw Fibo each wave in the bull market
Draw Fibo each wave in the bull market

In short, in a bull market, use the Fibonacci retracement on each bullish wave to wait for BUY in the zones of 0.382 – 0.5 – 0.618. There is no need to chase the market or “Fomo” because the bull will have resting time while running. It always steps back to gain momentum to continue running again.

Personal experience

In terms of “disobedience”, surely no asset has passed gold. Gold moves slowly when going up but it fluctuates and hunts SL continuously. As for going down, gold’s very fast. Sometimes it only takes 1 night to destroy all the previous increasing processes. Therefore, using Fibo retracement also needs to be flexible.

What about the entry point? Of course, Fibo is a tool for forecasting and planning. To enter the order, it is necessary to combine the key level + candlestick signal. I’ll leave this subject for the next articles.

I will continue with 2 topics in the upcoming article. They are Fibo 50 – the balanced zone and sharing about Fibo retracement for currency pairs.

The article is already long so I take a stop here. You should use the above knowledge to draw and backtest on Tradingview. It will help you a lot.


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