And this video I'm taking a look at Fibonacci retracement and extensions and Fibonacci is a mathematical
pattern that tends to repeat itself in nature.
If you want to know more about the actual numbers behind it and how they, you know, go about figuring
out how the pattern was figured out in the 12th century by Leonardo Fibonacci, there's a ton of information
on that.
But suffice to say, it has a certain amount of predictive and repeatable presence in the world of nature
and by extension, the world of trading.
So clicking on the Gane and Fibonacci Tools submenu, you can pull up a fib retracement and a a fib
retracement is simply.
A ratio of distance that a trade goes before.
It runs into a particular resistance barrier, so there are multiple Fibonacci retracement levels,
without a doubt, although the three most important are thirty eight point two percent fifty percent
and sixty one point eight percent.
So what that means is from the drop to the bottom, because you're measuring the entire move here,
this swing lower.
And when it rallies, half of the move will have been collected here.
With Fibonacci, you're looking to take the swing and see how far back can we pull before sellers come
in and continue to push?
And you can see we formed a perfect shooting star in the weekly chart here at the 50 percent Fibonacci
retracement level.
It's one of the most common ways to get involved is to look at the 50 percent, the thirty eight point
two percent or the sixty one point eight percent levels and look for price action like that to trade.
And quite frankly, that's a very simple, straightforward.
Type of trade that you find yourself in, you wait for the price action first, though.
As we go lower.
You will see traitor's.
Start from there and then I'll pull this up and it's at the 50 percent again, we got a hanging man
here, which was a cell signal, and you continue to go lower from there, pretty straight forward trading.
And Fibonacci does tend to work better on higher time frames.
For example, you can do it like on a five minute chart, but really at the end of the day, it doesn't
mean as much.
Another thing is.
Fibonacci extension, so you can do like a.
Trent, face extension on the same move.
And this represents the 50 percent retracement, but then you get these things, these extensions,
one point six one eight or one hundred sixty one point eight percent.
Extension, so this measures where can we go based upon the initial move?
We've pulled back, we've entered, so we need a place to get out based upon Fibonacci extensions,
that's the level you're looking for and we formed a double bottom just below it.
It's pretty straightforward.
Do you want to stay into this trade, I mean, you could and it certainly would have worked out, but
since then we've bounced the bid.
The double bottom again, price action has told you that the the the move lower is certainly running
out of steam.
This is a perfect setup.
Typical type of.
Fibonacci trading, but there's a lot of other things you want to pay attention to as well.
Price action notice this is 40 dollars price action tends to form around these round figures anyways
if you go back to the support resistance.
Remember that I had talked about every ten dollars, so let me go ahead and.
So notice that the 50 percent Fibonacci retracement level is just above thirty dollars, thirty dollars
is what caused the trouble.
We went down to 20, which is what causes the support, basically, we've bounced back here, we've
fallen from there again and we've gone down to roughly ten dollars.
So the best way to use these tools is to.
Use the the tools themselves, because they do have a certain amount of predictive power, and I think,
quite frankly, it's just herd mentality.
I don't even know if there's any magic involved in it.
It's just it works because people say it works.
You have round figures.
Here on the chart, and of course, you have price action, so if you can marry the three.
This is how you properly use Fibonacci and you'll see examples of this.
Everywhere.
So let's go ahead and.
See if we can find.
Let's see what Tesla's got going on.
So I'm going to go ahead and use the trend based extension, because it gives us both.
We've had a nice, strong move all the way up to here, we pulled back here, so let's take a look at
this trade.
The first thing that you should notice is that we have.
A pull back as we started to fall, you pull back to the 50 percent.
And a hammer right there.
Well, what else is there?
One hundred and twenty dollars.
It's a nice round figure.
The move had initially tried to move to two hundred dollars.
That caused the resistant.
Notice that we made it.
To the.
The first extension, which is just at about three hundred.
That being said, you can clearly see that there is a symmetric pattern going on here.
These are all things that you can calculate, you've got the sideways action of the big figures, you've
got the price action candlesticks, and then you've got the Fibonacci's remember when you're trading.
You're always better off to have multiple reasons to be in a trade.
That's going to be true if you're using Fibonacci or anything else, but but that's especially true
in Fibonacci because what you want is a confluence of not only Fibonacci traders, but you also want
people looking at it for multiple reasons.
The round figure, if you remember previously, and support resistance.
I talked about needing orders filled.
So that comes into play as well.
You clearly want nice big swings when you attach your Fibonacci retracement tool to the chart.
You want.
Them to be at extremes, if at all possible.
So this massive extreme here.
Certainly would qualify.
And you're going to find that somewhere right around the.
Thirty eight or so or the sixty one, we have bounced and taken off to the upside.
Again, you can see how.
Predictive they are, but you don't just put up a fib in trade that you put up a fib, you hope.
And you become more interested in if it's at a place like 50 dollars and then you look for price action,
if you get all three of those, then you have a winning set up.
It's not a guaranteed setup, but there are enough things going on at the same time to get people interested.