The use of Fibonacci retracement tools is very much popular among the professional traders in the financial world. If you look at the expert traders at Saxo then you will notice that every single one of them is trading the live assets in favor of the long-term prevailing trend in the market by using the Fibonacci retracement tools. Though there are many different ways of trading the financial instrument in the world but the expert prefers to use the Fibonacci retracement tools in the market to execute high-quality trades in the market. But before you start trading the live assets with this tools make sure that you have a very clear understanding of the basic of the forex market or else you will fail to make money by using this system. In this article, we will discuss how to use the Fibonacci retracement tools in your trading platform in the perfect way.
Swing highs and swing lows
The Fibonacci retracement levels in the market are drawn to the trading platform by using the swing highs and lows in the market. Most of the novice traders in the financial industry use the smaller time frame to find the swing high and low of the market and thus they fail to execute high-quality trades. But if you look at the professional traders then you will notice that most of them use the daily or the weekly time frame to find the key swing highs and lows in the market. Once they find the key swing highs and lows in the market they simply draw the Fibonacci retracement levels in their trading platform and execute the trades with proper risk management factors.
Key retracement levels: When you draw the Fibonacci retracement levels in your trading platform you will see that there are many retracement levels in the market. But the expert in the financial market doesn’t trade all the levels rather they trade the key retracements levels only. In the eyes of the trained professional 38.2 %, 50 %, and 61.8 % is considered to be major retracement levels in the market. They wait patiently until the price hits one of these levels in the market to execute their trades in the market. However, if the price of a certain assets breaches the 61.8 % retracement levels in the market then you can consider it as a strong sign of trend reversal.
Price action signal: Price action trading strategy is very much popular nowadays and all the professional traders use the reliable price action confirmation signal to execute their trades in favor of the long-term prevailing trend in the market. So when you draw the key retracement levels in the market try to find the reliable candlestick pattern in the key support or resistance level to execute your trade in favor of the long-term trend. Though this system is extremely profitable and reliable make sure that you follow proper risk management factors in every single trade.
Summary: Fibonacci trading strategy is extremely profitable and reliable and if you can truly master this trading strategy then you can easily execute high-quality trades in the market. But when you look for possible trade setups in the market make sure that you use the higher time frame in the market to eliminate the false signals. Though the system is extremely profitable yet you should use proper risk management factors in every single trade to survive the market in the long run.