Fibonacci Retracement – Using Fibonacci Indicator MT4 Effectively
Welcome again on our Best MT4 indicators website! For a trader, the tools you use in trading goes a long way to determine how profitable you will be. While the market comes with various tools, most times deciding on the particular tool to use can be a daunting task, especially if you are new. Nevertheless, one crucial tool that is quite simple for any trader – irrespective of their level to use appropriately is the Fibonacci retracement tool.
The Fibonacci retracement tool is efficient and flexible to use in finding both entry and exit points. Besides this, the simplicity as to which it helps trader find support and resistance levels is priceless. In this post, you will learn how to use the Fibonacci indicator MT4 when trading.
This post will revolutionize the way you perceive or use the Fibonacci indicator. Our concern is not how the indicator comes about but how you can take advantage of it while trading.
Fibonacci Retracement Tool in Trading
One thing all traders will agree to besides the famous statement that the trend is your friend is the fact that the market doesn’t move in a straight line. Yes, the forex market moves in an upward and downward pattern. If it moves in one direction, then we would have had more billionaires more than Bill Gates and co.
Price movement comes in swings or waves. At times, it gets to a particular point, withdraw itself before advancing beyond its first point. The withdrawal period is like a retracement in the market. It is the natural behavior you will experience in the market. For instance, you breathe in and out; perhaps not at the same pace.
During the breathing in and out, there is an upward and downward movement. In trading, when it goes up and tries to come down, we call it retracement. The Fibonacci indicator MT4 helps traders to trade these retracements.
Retracement offers traders a minimal risk manner of entering into a strong or existing trend. The upward and downward movement allows traders to sell high and buy low and buy low and sell high. With this, traders can make money trading the retracement.
Why everyone loves using Fibonacci indicator MT4
The Fibonacci retracement tool is famous for both new and professional traders because it works if used properly. Have you heard about the golden ratio? Well, traders have this perception that the 68.1% retracement level gives perfect accuracy when compared to other price prediction techniques.
The Central banks and big investors run the market and spend more money analyzing the market. One such tool is the Fibonacci tool, which helps to predict price accurately. Because of this, many traders use the Fibonacci indicator MT4 with other strategies to find entry and exit point because that will depend on how profitable a trader can be.
Three ways to use retracements effectively
The Fibonacci indicator MT4 is understanding in fining areas where retracement may end. However, finding how it develops over time is essential to trading; if you haven’t considered implementing the Fibonacci retracement tool as part of your strategy, then here is why you need to change that.
Firstly, the Fibonacci indicator MT4 allows you to find areas of entries with low risk, even in a strong market. Secondly, if you want a tool to identify confluence with other technical points such as supply and demand and support and resistance, then the Fibonacci retracement tool does it perfectly.
If you understood these two reasons but didn’t know how to use them effectively, here are three ways you can do that today.
Getting into strong market moves
Some currency pairs can be very volatile, and for most traders finding an entry with low-risk can be overwhelming. During these volatility periods, price moves violently in such a way that without proper risk management, your account will tell the story. However, a tool such as Fibonacci indicator MT4 is usable to enter the market effortlessly.
If you are conversant with finding support and resistance levels, then the Fibonacci retracement tool is an added advantage for you. The same way you wait for the price to return to this level is how you trade using the Fibonacci tool. For advanced traders, they use candlestick patterns along with other entry signal strategy to confirm if the price return to the level they are waiting on to enter a trade.
For instance, in the chart above, experienced traders will short after seeing the price at the 50% level with the big bearing engulfing pattern appearing at that level. It is advisable not to depend on the Fibonacci retracement tool alone to make a judgment on when to enter or exit the market.
Find confluence or confirmation
It would help if you looked for confluence when trading and the Fibonacci tool comes handy. Confluence in the forex market is extremely easy to find.
To explain it better, take a look at the chart above. You can use the Fibonacci indicator mt4 on the chart to draw from the swing low to swing top. Then find an area with high demand, if the level matches the 50% Fibonacci level, then you have a confluence – there is every likelihood of price reversing if it gets to that point. For better entry, if support and resistance, supply and demand levels, and Fibonacci level meet at the 50% level, then you can enter the market.
Predicting the end direction of a swing
Another practical use of the Fibonacci retracement tool is in predicting where swings will end. Most traders don’t know about this, but you can use it to your advantage. If you look at the previous chart, you will observe the 123.60% level, which is below the 100% level.
Well, that level is not part of the Fibonacci retracement level but an extension. These levels tell you how possible swings might unfold in the future. Besides trading the retracement, you can trade price extension levels.
Summary Of Fibonacci Indicator MT4
A Fibonacci retracement tool is an essential tool for any serious trader. Importantly, knowing how to use the Fibonacci indicator MT4 will go a long while to establishing yourself as a voice in the biggest financial market of the world.
However, to help traders, we have various tools and top forex indicators to make trading seamless. These tools and indicators are very efficient; they are easy to reflect on market conditions and visually pleasing when used. So check them out through link and improve your decision making capability.
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