How to put Fibonacci retracements to work when you're trading the stock market
If you're looking for a way to enter trades, there is a centuries old tool which could be the perfect to use.
It is Fibonacci retracements.
So how does this tool work?
Let's take a closer look…
The ins and outs of Fibonacci retracements
is a great indicator to use to find levels of support and resistance. The tool works best when the market is trending upwards or it’s trending downwards.
You can use it to put on long trades on a retracement at a Fibonacci support level when the market is heading higher. And you can use it to put on short trades on a retracement at a Fibonacci resistance level when the market is heading down.
To uncover these retracement levels, you need to look for the significant highs and lows that have recently occurred.
Using Fibonacci when you’re trading the stock market
When the market is in a downtrend, you need to click on the high and drag the cursor down to the most recent low. When the market is in an uptrend, you need to click on the low and drag the cursor up to the most recent high.
The Fibonacci tool will calculate the levels where the market or asset you’re trading finds support or resistance.
This is how it looks on a chart…
Keep in mind that this tool is only for using on daily charts, not longer time periods.
You should find the charting software or the trading platform you use has a Fibonacci retracement tool.
You may find it useful to play about with this tool before putting it to work. Use it on historical charts and see what happens when the price hits these levels.
So there you have it. How to put Fibonacci retracements to work when you’re trading the stock market.
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