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  • How to Use the Fibonacci Tool?

    A Sure-fire Way of Trading Binaries with the Fibonacci Tool

    In my experience dealing with retail traders, I have come to discover that the Fibonacci retracement tool is one of those lesser used technical indicators in market analysis. Mention the MACD or moving average indicators and traders will immediately brighten up with recognition. But talk about Fibonacci and everyone just draws blank.

    Retracements are a normal part of trading. They occur all the time and a trader needs to know how to use retracements to his advantage. This is what the Fibonacci retracement tool does for you. The tool plots five horizontal lines on the charts which correspond to 5 possible areas to which prices may retrace, with the distances expressed in terms of percentage of the original move:

    - 100%

    - 61.8%

    - 50%

    - 38.2%

    - 0%

    Prices can retrace to any of these points. So how would you use the retracement tool to trade binary options?

    If I were to trade binary options using retracement, this is what I would do:

    1) I would select a strongly trending financial instrument, such as gold, EURJPY, GBPJPY or EURUSD.

    2) I would select a time frame that will confirm that what is playing out in the market is actually a retracement and not something else. I would therefore choose the Daily chart.

    3) I would purchase a “Touch” option in the Touch/No Touch trade type as my preferred trading option, picking a point between current prices and the 23.6% retracement point.

    Trade Technique

    Take a look at the Daily chart for the EURUSD. Note that by selecting this chart, I have already fulfilled my first two trade conditions. It is a daily chart, showing me when a retracement is actually occurring, and the EURUSD trends well, being the most actively traded currency pair in the market.

    I am now looking for how to fulfil my third condition, which is actually my trade objective. I want to pick a strike price at a point along the course of the price retracement, between the market price and the 23.6% Fibo level. To do this successfully, I must be sure that a retracement is actually in progress. How do I confirm this?

    Look at the area where a blue arrow points to “drag Fibo tool here” on the left side of the chart. The bullish momentum of the EURUSD has actually been checkmated by the formation of a reversal candlestick pattern, a bearish harami. An expanded version of that point is shown below:

    Occurring at the peak of a bullish momentum is a clear reversal signal. The retracement followed soon after, and went all the way to the 50% retracement point.

    Trading binary options is not rocket science. It just takes a trader knowing what to do and when to do it. But it also requires that the trader must be quite knowledgeable about topics such as candlesticks, chart patterns, etc. A trader has to be thoroughly at home with the candlestick patterns. If there is any topic in the financial markets that deserves attention, this is it. With candlesticks, you can determine price direction easily, and then add other tools to increase the success rate of your trade calls.

    This has been a lesson on how to use the Fibo retracement tool to trade in the binary options market. Next time, we will treat another interesting topic right here on BinaryOptions.net.

  • #2
    This is a very helpful post, I can now readily understand and formulate some strategies for my binary options trading.


    • #3
      Essentially, the Fibbonacci retracement tool does all of the work for you. The tool uses horizontal lines numbering 5 to indicate five positions on the chart that the price may hit in the retracement action. The distances between the points are described in percentages: 100%, 61.8%, 50%, 38.2% and 0%. Once you identify and understand that a retracement is occurring rather than a direction change, you can use this tool to help make money. One important factor when using this tool is that you trade in a market that is trending strongly. This could, for example be, EURO vs. US dollar, GBPJPY or even gold. By looking at the behaviour of the chart it is possible to ensure that what is going on is actually a retracement and that something else isn’t happening in the market. When you’re working off purely chart information it is important that you understand as much as possible. With extra non chart analysis it may be clearer what’s going on. After understanding where the retracement is going and understanding the depth of the retracement, it is possible to pick a point and to trade the binary.


      • #4
        A Fibonacci sequence is basically a series of numbers where the third number is a sum of the two preceding numbers. It has recently become popularized in the field of trading. An example is 0,1,1,2,3,5 and so on. This mathematical exercise can be used in financial trade and help people come to an appreciation of how to operate the stock market and Forex trading.

        Fibonacci retracements are used as indicators through which they help the binary options trader in his quest to continue to understand how this market operates. When used within the field of binary options trading, there are some key levels considered from Fibonacci levels which provide a window through which the trader can identify the price changes that present the biggest and main breakthroughs. There are five levels in this regard namely 23.6, 38.2, 50, and 61.8 percent as well as the 100 percent levels. As you can see, the 23.6 and the 38.2 percent levels are added together to give you the 61.8 percent standard.


        • #5
          I think it will take me a little while to fully understand how to technically use fibonacci on my trading with binaries.


          • #6
            Ben Fibonacci will just be a piece of cake if you try to understand it harder and work on it patiently, though I have to admit about the complexity of those data involved.


            • #7
              BlazingPuffy I like the video you have shared, the explanation is pretty simple and if you come to corelate it with the fibonacci application on the stock market movement you will easily understand how can a stock be bullish or bearish in nature.


              • #8
                I think I am going to take a fibonacci course to look into this graph deeply, am really having a hard time with with graphs and numbers but I do love trading BO. geesh this sounds funny right?


                • #9
                  seriously? i don't see how you can use fibonacci on predicting asset values.


                  • #10
                    me too. i don't think this can be used for making predictions. asset values follow no formula or pattern.


                    • #11
                      I do, too… it looks so complex.


                      • #12
                        I’m interested on it. Anyone care to enlighten me about it?


                        • #13
                          Has anyone here ever used it? How did your trading experience go?


                          • #14
                            I think this piece is very informative and I can’t wait to use Fibonacci the next time I start trading!


                            • #15
                              Is it advisable to use it for a newbie like me?


                              • Blackcomb
                                Blackcomb commented
                                Editing a comment
                                Of course all those tools made available online are of big help even if you are a newbie or not, it's just that you need to learn how to make the most out of those signals and indicators you are having.


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