What is Fibonacci retracement?
Fibonacci retracement is a technical analysis tool based on the idea that markets will retrace a predictable portion of a move, after which they will continue to move in the original direction. This tool uses horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before the asset continues in the original direction.
In technical analysis, Fibonacci retracements are created by taking two extreme points (usually a major peak and trough) on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8%, and 100%. Once these levels are identified, horizontal lines are drawn and used to identify possible levels of support and resistance.
How to use Fibonacci retracement for Trading in Indonesia?
Before you can use Fibonacci retracement tool, you need to identify the trendline. The trendline should be drawn from the low to the high, or vice versa, depending on whether the trend is bearish or bullish.
Once you’ve identified the trendline, you need to identify the Fibonacci retracement levels. To do so, simply click on the Fibonacci retracement tool and then click on the low and high of the trendline. This will automatically identify the retracement levels. Once you have these levels, you can use them to buy and sell for profits.
How to use the Fibonacci retracement levels for Trading in Indonesia?
To use the Fibonacci retracement levels for trading, you need to identify the support and resistance levels. The support level is the lower limit of the price range, while the resistance level is the upper limit of the price range. These levels help determine the entry and exit points for trading.
When the market trend is moving upward, use the Fibonacci retracement levels to determine the support levels at which to buy. Buy at the 38.2% level or the 50% level for a confirmed uptrend. If the market continues to move upward, sell between the 50% level and the 61.8% level.
When the market trend is moving downward, use the Fibonacci retracement levels to determine the resistance levels at which to sell. Sell at the 38.2% level or the 50% level for a confirmed downtrend. If the market continues to move downward, buy between the 50% level and the 61.8% level.
Benefits of using Fibonacci retracement for Trading in Indonesia
One of the primary benefits of using Fibonacci retracement in trading is its ability to identify support and resistance levels. This tool is particularly useful when trading is volatile and there is no clear direction for the market. By identifying support and resistance levels, traders can enter and exit positions with greater accuracy and efficiency.
Another benefit of using Fibonacci retracement is its ability to identify trendlines. The tool is especially effective in identifying trendlines during extended periods of price volatility. This helps traders avoid false signal trends and improves their overall profitability.
Overall, Fibonacci retracement is a powerful tool for trading in Indonesia. It provides traders with a clear understanding of market trends, supports and resistance levels, and entry and exit points. By applying this tool correctly, traders can reduce the risk of losses and maximize profits. As with any trading tool, it is important to practice and understand the principles underlying the tool, before applying it to your trading strategy.