Indices Retracement Trading
How Do I Use Fibonacci in Indices Trading?
A good indices trading retracement strategy to use is the fibonacci retracement indicator. Fibonacci retracement indicator is used by many traders as a indices retracement strategy indicator.
The fibonacci retracement indicator is placed on a stock indices chart and this Fibonacci Retracement indicator then calculates the retracement levels on the stock indices charts.
Fibonacci Retracement Strategy Examples on Upward Stock Indices Trend and Downwards Indices Trend
How to Trade Retracement on Upwards Indices Trend
In the Indices Retracement Strategy example explained and illustrated below the stock indices trading price is moving up between chart point 1 and chart point 2 then after chart point 2 it retraces down to 50.0% retracement level then stock indices trading price continues moving up in the original upward trend. Note that this stock indices retracement indicator is drawn from point 1 to point 2 in direction of the trend (Upward Direction).
Because we know this is just a retracement based on our chart indices trend - using this retracement indicator, we put a buy order just between the levels 38.2% and 50.0% and our stoploss just below 61.8% pull back mark. If you had put buy at this point in the trade example explained and illustrated below you would have made a lot of pips after the stock indices trading price retracement reached the Fib 50.0% level and then continued moving in the original upward trend.
How to Trade Retracement on Upwards Indices Trend - Indices Retracement Strategy
Explanation for the Above Stock Indices Retracement Strategy Example
Once the stock indices trading price hit the 50.00% retracement level, this retracement level provided a lot of support for indices trading price, & afterward the stock indices trading market then resumed the original upward trend and continued to move upwards.
23.6% retracement level provides minimum support & isn't an ideal place to set a stock indices trade order.
38.20% retracement level provides some support but stock indices trading price in this example continued to retrace up to the 50% zone.
50.0% retracement level provides a lot of support & in this example, this was the ideal place to set a buy stock indices trade order.
For this Indices Retracement Strategy example, the stock indices trading price retracement reached the 50.0% retracement level, but most of the time the stock indices trading market will retrace up to 38.2% retracement level and therefore most of the time indices traders set their buy limit pending orders at the 38.2% Fibo retracement level, while at same time placing a stop just below 61.8% Fibo retracement level.
How to Trade Retracement on Downwards Indices Trend
In the Indices Retracement Strategy example explained and illustrated below the stock indices trading market is heading down between chart point 1 and chart point 2, then after chart point 2 the stock indices trading price then retraces up to 38.2% retracement level then it continues moving downward in original downward trend. Note that this stock indices retracement indicator is drawn from point 1 to point 2 in direction of the trend (Downward Direction).
Because we know this is just a retracement based on the chart indices trend we put a sell order at 38.2% retracement level and a stop loss just above 61.8% retracement level.
If you had put sell order at the 38.2% retracement level as shown on the trade below you would have made a lot of pips afterwards after the stock indices trading price reached the 38.2% retracement level and then resumed the downward indices trend.
In this trade the retracement of stock indices trading price reached 38.2% retracement level and did not get to 50.00% retracement level. It is always good to use 38.2% retracement level because most times the stock indices trading price retracement does not always get to 50.00% retracement level.
How to Trade Retracement on Downward Indices Trend - Indices Retracement Strategy
Explanation for the Above Indices Retracement Strategy Example
The above Indices Retracement Strategy examples is a stock indices retracement trading setup where the stock indices trading price retraces immediately after touching the 38.20% Stock Indices Chart Fibonacci Retracement Level.
This Indices Retracement level provided a lot of resistance for the stock indices trading price retracement, this was the best place for a trader to set a sell limit order as the stock indices trading market quickly moved down after hitting this retracement level.
