Thisguideismeanttohelpunderstandthebasicsofthefibtoolandrepresent

howtheyareplacedonthechart.
Firstthereisnothingmagicalornosecretsetofnumbersastothereasonsthat
fibsareusedintrading.Itissimplyameasuringtool, if youneedmagicor
psychichelptradingyouneedtocallthe1900numberstogetthenextdirection
ofthemarkets,betteryetjustflipacoin.
Twopointsyouneedtounderstand
1. Themarketmovesfromeconomicconditionsandisdisplayedineconomic
indicatorsthatyouseereportedasthenews.Thissetsthemarketinits
motion.Notalwayswillyouseeapairgoinginthedirectionitshouldfrom
daytodaynewsannouncementsforthesimplefactsomethingistrumping
itoritisnotsignificantenoughtochangethecurrentsentiment.
2. Indicators,fibtools,candlestickformationsdonotmovethemarketthey
aremerelyshowingyouentryandexitpoints.Mostofthetimenew
tradershavesomanyindicatorsfromsomanydifferentsystemsor
methodsthattheyhaveaconfusedsituation,itsevidentinthequestions
youseeaskedontheforumshere.
MepersonallyItradebasedoffsupportandresistance.Ifyoudontknowwhat
supportandresistanceisitstheareasonthechartyouseepricereversingits
directionat.Supportiswhatformsbelow price Resistanceiswhatformsabove
price.

IuseFibonacciasaguidetotradesupportandresistance.Thefibtoolisdrawn
fromaresistancepointtoasupportpoint.Ihaverenamedthelevelsofthefib
tooltosuitthejobIwantthetooltoaccomplish.Thefibtoolisarepresentation

ofsupportandresistanceasviewedfromahorizontalplane,perfectformystyle
oftrading.Thepointofrenamingthelevelsisthatnomatterifyoudrawthetool
bystartingatthetopandpullingtothebottomorthebottomandpullingtothe
topthelevelswillbeinthesameplaceandbyrenamingthelevelsofthetoolyou
canalwaysdrawfromthehighpoint(resistance)tothelowpoint(support).The
normallevelsofthefibtoolarenotactuallyFibonaccinumbersbutderivativesof
theFibonaccinumbers,therearethemostcommonnumbers used0,23.6,38.2,
50,61.8,76.4,and100.Thentherearetheextensions138.2,161.8.Nothing
magicaboutthemotherthanthefacttheselevelshaveproventobeusedover
timeandstillare.MepersonallyIdonotuseallthenumberssincetheyserveno
purposeforwhatIusethemfor.Idontusethe23.6orthe76.4.Alsoleavingthe
descriptionintheformofanumbercanbeconfusingifyouarealwayspulling
fromhightolowbecauseleavingthenumbersandpullingfromlowtohighthe
numberswillbebackwards.RenamingthemtorepresentwhatIwantthetoolto
showmelongandshortsolvesthisaswell.
Abetterwaytodescribethefibtoolismoreofabalancemeasurementbetweena
longandashortcondition.Iveusedthisanalogybeforeanditsifyouimaginethe
playgroundseesawandhowitworksbywhenmoreweightisappliedtooneside
ittendstotipintothedirection withthemoreweightonit,nowapplying
pressurefromtheothersideitwilltryandtiptotheothersideandifenough
pressureisapplieditwilltipovertotheother sideandreverse.Thefibtoolisjust
arepresentationofthissimpleconceptinthesensethatifmorebullishpressure
isappliedthepairwilltendtotipintoabullishcondition,ifenoughbearish
weightcanbeappliedintheoppositedirectiontothebullishpressureitwill
attempttotipinthebearishdirectionfromtheweightovercomingthepressure.
Thebalancepointalwaysbeingthe5ofiblevel(renamedPivot). Ifyouremember
oncetheseesawwasalmostinbalanceoralmosttippedtotheothersideitalways
requiredthatextraoomphtopushitonovertotheotherside,withouttheextra
oomphitfellbacktothedirectionitwasin.ThatextraoomphiswhattheLong
andshortlevelsrepresentsonceitgetspasttheoomphpartitwouldreverseand
gototheotherside.
Nowwiththisfreshinyourmindwewillapplythisconcepttothesupportand
resistancechartpostedearlier.
Firstcharthereshowsweplacethefibtoolbystartingattheresistancepointand
pullingdowntothesupportpoint,sowecanseethebalancepointsbetweenlong
andshort(fibsinnerlevelsLong, Pivot,Short).Thisistheoptimumplacewe
wantpricetogoaftereachmovementitmakes,idealconditionsareamovement
thenaretracement,amovementthenaretracement.

Thehighlightedareaiswherewewantpricetogoinanidealcondition.This
chartshowstheinnerlevelswherewewanttomakeourentriesfrom.

Whathappensinthisinstanceistheidealcondition,pricevisitstheinnerlevels.
Wehaveanindicationofabullishmovefromthepricewearemeasuringsowe
wouldbeexpectingpricetobounce.Abounceiswhenpriceisabovetheinner
levelsfalltothemandbouncesofflikeaball.hencebounce.Abounceisnot
whenpriceisbelowthelevelsgoesuptestthemandthenfallsagainthatsa
rejectionjustlikewhenacenterinabasketballgamerejectsanopponentfrom

dunkinginthebasket,herejectstheopponentsshot.Butwewanttolookatthis
inweightandpressure,weightmakesitgodownpressuremakesitgoup.In
thisexampleweightwasappliedtothepressurefromthebuying,butoncewe
reachedthebalancepointenoughpressureisreappliedandovercomesthe
weightagainandwegetthebounce,thisisyourentryonceyougetuseto
recognizingthis.Thereisnocertainwayormethodtoenterhereyoujustsimply
needexperiencetradingthemarketandovertimeitwillbecomenaturalbecause
therearesomanythingsthat affect itsmovementfundamentallyyouhavetobe
awareof. Itscalledlearningthemarketyouretrading.Igetalotofwhatifthisor
thisorthishappens.Thereisnowaytoanswerthisbecausetherearetoomany
reasonswhytoenterandwhynottoenterthatwecouldgoonandonfordayson
endtryingtodescribealltheconditionyouwillfaceasatrader.Safestentryin
myopinionisabreakora candleopeningpastthelevelsbuteventhisisnot
perfectandyouhavetobeabletoreadwhatsgoingontodecideyour
entryonceagainexperienceasatraderandknowingthemarketyourtrading.
IcantteachyoutotradeonlyshowyouthetoolsIuseandhowIusethem.

Nowthatenoughpressurehasbeenappliedanditovercomestheweightprice
willresumethedirectionitwasin.up.

Nowwegettotheextensions,the138.2andthe161.8.Whenweareinatrending
marketyouwillseethismore oftenandthatspricereachingtheextensions.
InitiallyIwouldrecommendtakingprofitsoutatT1,unlesspriceclearlyblows
throughT1andthentargetT2.T1isthe138.2andT2isthe161.8level.Thisnext
chartshowstheTargetrangesorpoints,takingprofitsouthereisthesmartmove
anddontworryaboutwhathappensafterthis.Youvemadeagoodprofitandits
timetojustwatchsoyoucangetreadytosetupagainfromthismove.Tryingto
geteversinglepipisabigmistake.
Theresnothingmagicalabouttheextensionseither,tounderstandtheconcept
thinkofbeinginaretailbusiness.Youwanttobuyatawholesalepricethensell
ataretailprice.Toapplythistothisfibtooltheinnerlevelsofthetool38.2,50,
61.8arewherepricebecomesabargainintothetrendingprice.Theextensions
138.2and161.8arethepointwherepricemeetstheretailvalue,butintheworld
offorexthisworksinbothdirections.