Fibonacci Retracement Lines
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Fibonacci was a mathematician who was born in the thirteenth century
in Italy. Modern traders pay homage to his work every day in
the market when they use Fibonacci lines to anticipate price support
or reversal. Before you take a long or short position, I strongly suggest
as part of your screening process that you identify not only support
and resistance but also the Fibonacci lines. Many times, price
will rally from or break below Fibonacci lines. When the lines coincide
with support or resistance areas, they tend to be important
points from which price moves in one direction or another. Figure
6.18 shows Fibonacci lines on a daily chart. Remember where and at
what price you encounter the Fibonacci lines. If you are trading
intraday, do not forget at what price the Fibonacci lines occurred.
The Fibonacci retracement lines in Figure 6.18 are calculated
from a line drawn from point 1 and ending at point 2. The calculation can be done by most technical analysis software. Remember, at or
near Fibonacci lines, price will usually move in a defined direction.
In Chapters 1 through 6, you learned statistical and technical
information about trading. Unfortunately, this will not be enough to
make you a successful trader. All of the technology and technical
skill in the world will be useless to you unless you can control emotional
decisions. In Chapter 7, you are going to learn about the next
evolution in trading. You will come to understand how you can be
trained to reach a level of control and focus beyond what you think
is possible. Chapter 7 is the key that will unlock your potential as a
trader and open the door to previously unrealized performance.
The challenge of Chapter 7 is to understand and accept that your
potential lies not in technology but in biomechanical training.
Fibonacci was a mathematician who was born in the thirteenth century
in Italy. Modern traders pay homage to his work every day in
the market when they use Fibonacci lines to anticipate price support
or reversal. Before you take a long or short position, I strongly suggest
as part of your screening process that you identify not only support
and resistance but also the Fibonacci lines. Many times, price
will rally from or break below Fibonacci lines. When the lines coincide
with support or resistance areas, they tend to be important
points from which price moves in one direction or another. Figure
6.18 shows Fibonacci lines on a daily chart. Remember where and at
what price you encounter the Fibonacci lines. If you are trading
intraday, do not forget at what price the Fibonacci lines occurred.
The Fibonacci retracement lines in Figure 6.18 are calculated
from a line drawn from point 1 and ending at point 2. The calculation can be done by most technical analysis software. Remember, at or
near Fibonacci lines, price will usually move in a defined direction.
In Chapters 1 through 6, you learned statistical and technical
information about trading. Unfortunately, this will not be enough to
make you a successful trader. All of the technology and technical
skill in the world will be useless to you unless you can control emotional
decisions. In Chapter 7, you are going to learn about the next
evolution in trading. You will come to understand how you can be
trained to reach a level of control and focus beyond what you think
is possible. Chapter 7 is the key that will unlock your potential as a
trader and open the door to previously unrealized performance.
The challenge of Chapter 7 is to understand and accept that your
potential lies not in technology but in biomechanical training.