Downward Trend Retracement Indicator Strategy

How Do You Draw Fib Retracement for Downtrend?

The fibonacci retracement indicator is placed on a chart in an downward trending market and this Fibo Retracement indicator then calculates the retracement levels for the downward trend on the charts. Fibonacci retracement levels indicator is used by many traders as a trading retracement indicator.

In the Retracement Method example explained and illustrated below the market is heading down between chart point 1 and chart point 2, then after chart point 2 the price then retraces upto 38.2 % retracement area then it continues moving downward in original downwards trend. Note that this Fib retracement indicator is drawn from point 1 to point 2 in direction of the trend (Downward Direction).

Because we recognize this is just a pullback depending on the chart trend we put a sell order at 38.2% Fibonacci retracement level and a stop loss just above 61.8% Fib retracement level.

If you had put a sell order at the 38.2% Fib retracement level as shown on the trade below you would have made a lot of pips afterwards after the price reached the 38.2% Fibonacci retracement level and then resumed the downward trend.

In this trade the pull back of price reached 38.2% Fib retracement level and did not get to 50.00% Fibonacci retracement level. It's always good to use 38.20 percent Fibo retracement area because most times price retracement doesn't always get to 50.00% Fib retracement level.

Fibonacci Retracement Areas on Chart

Explanation for the Above Fibo Retracement Method Example

The above Fibo Retracement Method examples is a retracement setup where the price retraces immediately after touching the 38.20% Stock Chart Fibo Retracement Level.

This Fibo Retracement area provided a lot of resistance for the price pull back, this was the best place for a trader to set a sell limit order as the market quickly headed down after hitting this 38.2% Fibonacci retracement level.