Hi Blitzzz....,

My first post here. Have been hearling a lot about the fibo thing. Mind to enligthen us about how to use it?


Thanks.

fibonacci retracements are usually drawn with stock charting software...first, you need to identify two extreme points, for example, from the trough to the opposing peak.

Then, by drawing the fibo retracement between these two points, you should get nine horizontal lines at Fibonacci levels of 0.0, 23.6, 38.2, 50, 61.8, 100, 161.8, 261.8, and 423.6 percent.

The whole basis of fibo retracement is banking on that prices often return to their previous levels, and correct their initial movement. I don't know the exact maths behind it, but prices often face support/resistance at the level of Fibonacci Retracements or near them, when their prices do retrace, hence the name.

Hi Blitksg,

thks for the reply.

I still prefer the trendline way of looking for support and resistance.

But after ur explanation, i guess i have learnt an alternative again.

Thanks.

truetrue! trends are the first thing i look out for too! but ya..always good to know of alternative methods

Fibonacci retracement uses several imp. key levels which are important for a stock.

These values are fixed and are given in percentages.. 23.6% , 38.2% , 50% and 61.8%.

When the price of a stock rises it is expected to face resistance at these levels.

When a stock falls these values provide support to it.

In a very stong bull or bear market the prices usually don't retrace more than 25% to 38.2%.

However , if the prices start breaking 61.8% to 75% then the main trend may be under threat.

Open the attachment to understand better.

This stock got an imp. support at 38.2% however it is now moving down and may find support at 23.6%

Attached Thumbnails

 

The magic number - 1.618.

it is used just as a guide, as most will say price has memory.

As such, there are 4 parts in TA.

1. Support and Resistance
2. Patterns
3. Trend following
4. indicators

Anyone above will actually work just like fib ratio. So more towards personal preference rather than identify it as magic bullet.