Continuing our lesson from yesterday, here is more on how to use Fibonacci retracement with Japanese candlesticks.
Has buying pressure died down? Is resistance at the Fibonacci retracement level holding?
It’s possible. Other traders were probably eyeing that Fib level as well.
Is it time to short?
You can never know for sure (which is why risk management is so important), but the probability of a reversal looks pretty darn good!
If you had shorted right after that doji had formed, you could have made some serious profits.
Right after the doji, the price stalled for a bit before heading straight down.
Take a look at all those red candles!
It seems that buyers were indeed pretty tired, which allowed sellers to jump back in and take control.
Eventually, the price went all the way back down to the Swing Low. That was a move of about 500 pips! That could’ve been your trade of the year!
Looking for “Fib Sticks” can be really useful, as they can signal whether a Fibonacci retracement level will hold.
If it seems that the price is stalling on a Fib level, chances are that other traders may have put some orders at those levels.
This would act as more confirmation that there is indeed some resistance or support at that price.
Another nice thing about Fib Sticks is that you don’t need to place limit orders at the Fib levels.
You may have some concerns about whether the support or resistance will hold since we are looking at a “zone” and not necessarily at specific levels.
This is where you can use your knowledge of candlestick formations.
You could wait for a Fib Stick to form right below or above a Fibonacci retracement level to give you more confirmation on whether you should put in an order.
If a Fib stick does form, you can just enter a trade at the market price since you now have more confirmation that level could be held.
If you’d like to earn extra income trading on the Forex market, consider learning how to currency trade with Forex Smart Trade. With their super-accurate proprietary trading tools and best-in-the-business, personalized one-on-one training, you’ll be successful. Check out the Forex Smart Trade webinar. It shows one of their trader’s trading and how easy, intuitive, and accurate the tools are. Or try the Forex Smart Trade 14-day introductory trial for just TEN dollars.