Fibonacci Retracements
Overview
Fibonacci retracements identify potential support and resistance levels by measuring the percentage pullback of a prior price swing using key Fibonacci ratios: 23.6%, 38.2%, 50%, 61.8%, and 78.6%. These levels often coincide with where pullbacks within trends tend to find support or resistance, making them essential for entry timing.
Key Concepts
Key levels: 0.236, 0.382, 0.5, 0.618, 0.786. Measure from swing low to swing high (uptrend) or swing high to swing low (downtrend). 0.618 is the 'golden ratio' — the most widely watched retracement level. Fibonacci clusters: when levels from different swings converge. Extensions: 1.272, 1.618, 2.618 for profit targets.
Entry Signals
Buy at 0.618 retracement with price action confirmation, Entry at Fibonacci cluster zone (multiple timeframe levels converging), 0.786 retracement as the last opportunity before invalidation, Combine with horizontal S/R for confluence
Exit Signals
Enter at Fibonacci level, stop beyond the next deeper level or swing extreme. Target the Fibonacci extension (1.272 or 1.618). Partial profits at key Fibonacci levels as price extends.
Best Timeframes
Apply to the most recent clean swing on the timeframe you're trading
Pro Tips
Fibonacci levels are not magic — they work because millions of traders watch them, creating self-fulfilling prophecy. The 0.618 and 0.5 levels are by far the most reliable. Always combine with other confirmation.
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Divergence Trading
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Gap Trading Strategies
Gaps occur when price opens significantly above or below the prior close, leaving an unfilled space on the chart. Gap trading strategies exploit the tendency for gaps to either fill (price returning to close the gap) or continue (price extending in the gap direction). Understanding gap types — common, breakaway, runaway, and exhaustion — helps traders determine whether to fade the gap or trade its continuation.
Chart Patterns (H&S, Wedges, Flags)
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