WEBVTT 00:02.740 --> 00:10.240 In this video, how to trade Fibonacci, retracement and extensions and the first thing that you need 00:10.240 --> 00:17.020 to know is that it is based upon a mathematical sequence discovered in the 12th century by Leonardo 00:17.020 --> 00:17.840 Fibonacci. 00:18.190 --> 00:24.820 And basically, it is a scenario that looks something like this. 00:25.920 --> 00:31.950 You have consignee numbers where you add the first two, you get the answer to the third one, the ad, 00:31.950 --> 00:33.570 the second third one, you get the fourth. 00:33.580 --> 00:38.250 So it's this plus this equals this, this plus this equals this, this plus. 00:38.250 --> 00:39.360 This equals this. 00:40.020 --> 00:46.950 And without going into deep mathematical conversations, there are. 00:48.020 --> 00:49.520 They are all based upon. 00:51.440 --> 00:58.880 Sixty one point eight percent or point six one eight is the golden ratio, and there are. 01:00.410 --> 01:09.560 Not Alice Rivers, mountains, peaks, everything that you can think of seems to have this never involved 01:09.560 --> 01:11.700 in it as far as measuring it. 01:12.320 --> 01:21.590 Now you can study as much as you want about Fibonacci, but know that as far as finances are concerned, 01:21.590 --> 01:24.300 it is something that is widely followed. 01:24.770 --> 01:32.630 The idea is that there should be some type of action around a Fibonacci retracement level and or an 01:32.630 --> 01:33.560 extension level. 01:33.560 --> 01:36.230 And traders look for setups at these areas. 01:36.260 --> 01:42.110 Now, there are a lot of debates out there as to whether or not there's any efficacy to this. 01:42.110 --> 01:48.890 And the reality is that there are enough people to believe in it, that there is something to it, whether 01:48.890 --> 01:55.680 or not there's any mathematical nature to it in markets, that's completely up for debate. 01:56.360 --> 01:59.030 The idea is with a retracement. 02:00.110 --> 02:08.210 And that you take a swing low in a swing high, and when it pulls back, you expect it to be at one 02:08.210 --> 02:14.030 of these ratios, for example, this might be sixty one point eight percent on this and then you buy. 02:14.380 --> 02:19.460 So let's take a look at it in real life. 02:19.460 --> 02:22.220 Let's see really how we could have looked at this. 02:23.810 --> 02:30.280 So we are looking for swing lows and swing highs, it works in both directions. 02:31.010 --> 02:38.720 Again, though, it is somewhat subjective because you have to have everybody agree on one of the swing 02:39.140 --> 02:40.130 low in the swing high. 02:40.130 --> 02:43.530 As you can see, this is the Fibonacci retracement tool. 02:44.150 --> 02:45.990 So this was a swing low. 02:46.010 --> 02:47.230 This was a swing low. 02:47.240 --> 02:50.900 So let's take this one and drag. 02:51.080 --> 02:56.750 You drag it up to the swing high and then you look and you can see the price basically went down to 02:56.750 --> 03:00.140 the sixty one point eight percent Fibonacci retracement level. 03:02.090 --> 03:06.860 The catch with Fibonacci, though, is it really can't be used by itself. 03:08.630 --> 03:14.180 There are some people that simply by a 50 percent pull back, which ironically actually isn't a Fibonacci 03:14.180 --> 03:14.570 number. 03:15.380 --> 03:20.660 It's just that for years traders have always bond to 50 percent pullback. 03:20.660 --> 03:22.160 So they included in the tool. 03:22.950 --> 03:34.870 It should also be noted that there are a multitude of other numbers that you can have. 03:35.030 --> 03:42.020 I only have the important ones, the fifty the sixty one point eight, the thirty eight point two percent. 03:42.080 --> 03:45.800 There are other ones like the seventy eight point six, et cetera, et cetera. 03:46.730 --> 03:53.750 But really, those aren't used anywhere near as much of these three level thirty eight point two, sixty 03:53.750 --> 03:58.160 one point eight, and the 50 percent that tend to attract the most attention. 03:58.640 --> 04:01.040 So you can see that we have a swing low, swing high. 04:01.040 --> 04:04.520 We pull back to just about the sixty one point eight. 04:04.910 --> 04:08.060 And in fact, we closed above the fifty. 04:08.060 --> 04:10.250 So you could say that offered support, I suppose. 04:10.700 --> 04:11.840 Here's the thing, though. 04:12.740 --> 04:16.730 The reason this works isn't necessarily just because of that. 04:17.630 --> 04:20.210 There was obvious resistance there previously. 04:20.210 --> 04:22.700 So you can make an argument. 04:22.700 --> 04:24.560 Did fib work or was it? 04:24.560 --> 04:27.520 The previous resistance is now acting as support. 04:28.220 --> 04:37.100 The reality is this is a good setup because it's a hammer, which is a very bullish candlestick. 04:37.100 --> 04:42.080 And you'll learn about those later right at the fifty percent Fibonacci retracement level and the previous 04:42.080 --> 04:42.920 resistance level. 04:43.220 --> 04:43.790 So. 04:44.960 --> 04:46.940 You can make an argument either way. 04:48.540 --> 04:54.350 That being said, that is one way that you can look at it. 04:56.510 --> 05:02.180 You know, what's the difference between Fibonacci and horizontal support resistance? 05:02.870 --> 05:08.630 The reality is you better hope there's none because you need one or the other. 05:08.630 --> 05:14.630 And you can see that the sixty one point eight held on this bounce back just to show you that that it 05:14.630 --> 05:18.110 does cause some attention in both directions. 05:18.110 --> 05:23.660 You can see that we had fallen bounced right up to the thirty eight point two before going lower and 05:23.660 --> 05:24.560 the euro yen. 05:27.120 --> 05:32.420 Again, though, you can't just pick a level and say, OK, I'm going to start buying or selling there, 05:32.430 --> 05:36.960 there's a cluster here, there's a shooting star here, Bears Candlestick, and you short it again. 05:36.960 --> 05:39.240 That's something that you'll learn in the candlestick section. 05:39.660 --> 05:48.600 But this all kind of ties together nicely and even, you know, a big hot mess like Uber, which has 05:48.600 --> 05:50.190 been all over the place. 05:52.280 --> 05:58.250 You can start to see some semblance of pattern here, you can see right around the 50 percent Fibonacci 05:58.250 --> 06:04.340 retracement level of this big move lower, we did, in fact see some resistance. 06:05.550 --> 06:14.390 Fibonacci is also used for the extension tool, and it's in the same menu just to use trend based extension. 06:15.090 --> 06:22.050 So if you remember this Manassero one, the original one went from there to there. 06:22.320 --> 06:29.400 So you click on both of those levels and then you pull back to the beginning and what you get is the 06:29.400 --> 06:31.350 50 percent for every trace. 06:31.350 --> 06:37.770 But notice that beyond the highs, there is the one one hundred percent and then there's a one point 06:37.770 --> 06:39.270 six one extension. 06:39.540 --> 06:42.700 And that is an area that a lot of people will aim for. 06:42.990 --> 06:45.690 Again, though, I would draw your attention up here. 06:45.990 --> 06:50.690 Makes sense that there would be a little bit of profit taking in that region. 06:51.210 --> 06:55.860 The higher you go up the chain, though, the less likely it is to hit. 06:55.860 --> 07:03.600 So like the two point six one eight level is a very long time type of long term type of move. 07:03.930 --> 07:08.400 And to be honest with you, if your day trading, you're very rarely going to hit one sixty one. 07:08.970 --> 07:12.410 But it is something to look at if you're already involved in this move. 07:12.420 --> 07:16.530 So say you're here and you've seen a pullback of that nice move. 07:16.530 --> 07:18.720 You want to know where the market may be able to go? 07:18.720 --> 07:23.610 You can go back to the last swing low and use it. 07:23.610 --> 07:25.650 So it's a way to enter kind of late. 07:25.650 --> 07:31.710 Actually, feebs is not something that you fibonacci's not something that you can ignore because it 07:31.710 --> 07:35.700 is something that catches the attention of so many traders. 07:36.510 --> 07:39.240 But like I said, you have to kind of take it. 07:40.330 --> 07:47.200 For what it is, it's just a guideline to where things could happen, you know, you could very easily 07:47.200 --> 07:52.660 say, well, swing kind of swing low and look right here at the 50 percent Fibonacci retracement level 07:52.660 --> 07:53.200 and REPL. 07:56.030 --> 07:58.070 What would be even more impressive is. 07:59.100 --> 08:06.090 If we were at an area that had been resistance and possibly even support in the past, there's a gap 08:06.090 --> 08:06.530 there. 08:07.480 --> 08:14.050 Resistance, resistance, resistance, resistance and resistance and the 50 percent Fibonacci retracement 08:14.050 --> 08:22.660 level with a very bearish candlestick and an overextended move, you could probably put on other indicators 08:23.170 --> 08:28.710 that we'll be looking at the next few videos to give you yet another reason to short report that level. 08:29.800 --> 08:36.430 So, again, don't get too hung up on Fibonacci, but do realize that it gives you an opportunity to 08:36.430 --> 08:41.590 look for places where people are going to be trading and that's really all it is. 08:42.550 --> 08:46.540 In the next video, we'll take a look at how to trade exponential moving averages.