A term used in technical analysis that refers to the likelihood that a financial
asset's price will retrace a large portion of an original move and find support
or resistance at the key Fibonacci levels before it continues in the original direction.
These levels are created by drawing a trend line between two extreme points and
then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%,
50%, 61.8% and 100%.
Fibonacci retracement is a very popular tool used by many technical traders to help
identify strategic places for transactions to be placed, target prices or stop losses.
To recap: The best technical indicators are firstly trend lines/support/resistance/volume.
After that would come the versatility of the MACD. It can be left on the chart at
all times. Use only buy signals in the uptrend and sell signals in the downtrend.
Use both signals in a range.
In Trends use 2-3 of the following maximum:
1. Trend lines
2. Moving Averages
3. MACD (buys in uptrend or sells in downtrend)
4. ADX (above 30)
5. PSAR (for stops in strong trends) OR
6. ATR levels for stops
In Ranges, use 2-3 of the following maximum:
2. MACD – both buy and sell signals
3. Bollinger Bands
5. Slow Stochastics
6. ADX below 30
7. ATR levels for stops