Forex: GBP/JPY finds support at 125.60 – Forexrazor
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Forex: GBP/JPY finds support at 125.60
Forexrazor High-Risk Warning Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, … |
3 Mistakes to Avoid when Plotting Fibonacci Tools on Forex Charts
Successful Forex trading using technical analysis hinges a lot on correct application of technical indicators, and the Fibonacci tools are not an exception. It is pretty easy to apply a tool like the Fibonacci tool retrospectively when the price action is all done and nicely fits, but the real challenge is how to apply the Fibonacci tools when trying to determine where a retracement action is going to end for a renewed trend move to resume. In this piece, we will try to identify common mistakes that traders make when using the Fibonacci tools and how to avoid them.
1. Plotting Fibonacci retracements on a short time frame.
This is perhaps the greatest mistake made by traders when using Fibonacci tools such as the Fibo retracement tool. Why is this so? In Forex, the market activity in a short time frame such as the 15- minutes or 1-hour time frame is too short to effectively determine the trend of a currency. What the trader may see as a strong downtrend on a 1-hour chart or a 4-hour chart may actually be a retracement on a daily chart. Trying to plot a Fibonacci retracement tool on the shorter time frame will only end in disaster. The trend pattern of currencies on a longer time frame such as the daily chart is usually a better determinant of the trend. The best thing to do here is to use the longer time frame to determine the trend, apply the tool and then switch to the shorter time frame to make your entry determination.
2.Over-reliance on the Fibonacci tools
In Forex, it is a bad practice to use only one indicator to carry out your technical analysis. Confirmation of the entry is best done using two or three indicators that supplement each other, and the Fibonacci tools are not an exception.
To give an example, let us assume a currency pair is undergoing a downward retracement following a particularly strong uptrend. Where do you possibly think the retracement will halt, especially given the fact that there are five possible retracement levels (23.8%, 38.2%, 50%, 61.8%, 100%)? This is where you have to turn to other indicators such as the Stochastics, MACD or RSI for help. For example, if I get a Stochastics cross at an oversold level (i.e. Stochs crossing upwards at
Always confirm entries with more than one indicator.
3. Misapplication of the Fibonacci Tool
Many times, traders simply misapply it. What does misapplication mean? Fibo tools are best plotted from the swing high to the swing low. If the trader does not use the highest or lowest points on the chart for tracing the tool, an inaccuracy has set in and this is a clear example of misapplication. Another example is tracing the tool from a candle shadow to a candle body or vice versa. A trader must be consistent. For the best results, always trace from the tip of the upper shadow (the wick) of the candle making the high, to the tip of the lower shadow of the candle making the swing low.
These are the common mistakes made by traders when using the Fibonacci tools. Avoid these mistakes to get the best results possible from your Fibonacci tools.
Article was written by Alexander Collins who started his own Forex blog recently. Need Fibonacci, Camarilla, Pivot point calculators? Download all these Forex trading tools at PipBurner.
Forex: EUR/HUF up on possible sanctions to Hungary – Forexrazor
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Forex: EUR/HUF up on possible sanctions to Hungary
Forexrazor High-Risk Warning Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, … |
Forex: USD/CAD rises above parity
FXstreet.com (Córdoba) – The Loonie weakened against the Greenback on Wednesday as appetite for…
For more information, read our latest forex news.
Download Forex Trading App for iPhone, BlackBerry and Android from Vantage FX – MarketWatch (press release)
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Download Forex Trading App for iPhone, BlackBerry and Android from Vantage FX
MarketWatch (press release) LONDON, February 22, 2012 /PRNewswire via COMTEX/ — The Vantage FX UK ( http://www.vantagefx.co.uk/ ) trading platform is now available on iPhone, BlackBerry and Android for Forex traders who want to manage their positions on the move. |
Forex: EUR/GBP prints new 2012 highs
FXstreet.com (Barcelona) – The EUR/GBP breached above 0.8400 level ahead of German and EMU PMI,…
For more information, read our latest forex news.
Forex News Trading UK MPC Meeting Minutes 02/22/12
MPC Meeting Minutes is scheduled to be released today and since it´s customary for BOE (Bank of England) not to release a statement along with its interest rate decision (2 weeks ago) if there were no changes to either rate decision or APF (Asset Purchasing Facility, UK´s quantitative easing program); today will be the first [...]
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Forex: EUR/USD holds at 1.3216 – Forexrazor
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Forex: EUR/USD holds at 1.3216
Forexrazor High-Risk Warning Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, … |
Greek deal fails to stoke forex risk appetite
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Forex Flash: Upward pressure to bond yields if EMU PMIs improve – Danske Bank – FXstreet.com
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Forex Flash: Upward pressure to bond yields if EMU PMIs improve – Danske Bank
FXstreet.com FXstreet.com (Barcelona) – Danske Bank analysts observe a cautious market reacting to the Greek debt deal, in which the country commits to implement strong reforms and harsh austerity. “However, if progress is made according to plan in the coming … |
