How to Use Fibonacci for More Profit
One technique that is often used by traders is Fibonacci retracement. This technique can be very effective to use in determining entry and exit positions in the market, but the technique is also risky if not used in the right way.
Fibonacci retracement is an indicator that overlooks support and resistance points, so traders can determine when to enter the market to gain money and determine stop loss points. Usually the Fibonacci retracement is used by traders in the foreign exchange (forex) market.
Terms of How to Use Fibonacci Retracement Correctly
There are several conditions to be able to use the Fibonacci method correctly, namely:
Market conditions should be in a clear bull or bear trend. That is, the asset must have higher highs and higher lows in an uptrend. The asset must also be at lower lows and lower highs in a downtrend.
The technique should be used with other indicators such as the RSI (Relative Strength Index). The RSI informs where the asset has been overbought and has fallen in price which provides assurance that a bounce is likely to occur. Without complementary indicators, later this technique can be misleading and bring big losses to traders.
Other Fibonacci retracement indicators that are best used besides the RSI are moving averages, volume, and other relative strength indicators. When used in the right way and combined with the right indicators, the Fibonacci technique can help maximize profits and reduce the risk of loss.
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