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Understand & Use Fibonacci Ratio’s

Part.2
Retracements & Projections
by Sunil Mangwani

www.fibforex123.com

Fib retracements and projections – Fib retracements – • The basic use of Fibonacci retracements is to find potential levels of support or resistance “behind” the market.fibforex123. Ideal situation to use in – • To estimate the horizontal levels of support/resistance for a pullback in an existing trend.com . Fib retraces will draw levels BELOW the current price. If the market is moving up and making new highs. www.

www. • Once these levels are identified. • The direction of the prior trend is likely to continue once the price has retraced to any of the ratios. 61.2%.com .6%. 50%.fibforex123.Plotting Fib retracements • The Fibonacci retracements are calculated by taking two extreme points (usually a swing high and swing low) on the price movement and dividing the vertical distance by the key Fibonacci ratios of 23. horizontal lines are drawn and used to identify possible support and resistance levels. 38.8% and 100%.

786 level • Of all the ratios. from where price has a very high probability of retracement. • The 0. • This is the level. it is best to wait for price to break the fib retracement of 0.786 level holds a lot of importance.786. • When we are looking at a change of trend.Fib retracements – the 0.com . and hence acts as a very strong level of resistance / support. • This number is the square root of the “golden number” 0. the 0.fibforex123.786 is thus known as the “reversal” fib level.618. www.

com .Example of Fib retracements – www.fibforex123.

Use of the Fib retracements for Entry & Stop • For price in an existing trend . • So the break of the 23. www.which becomes the correct technical level to place the stop. • If the pullback is held within the Fib retracements.when we are looking for a pullback to rejoin the existing trend.fibforex123.6 level. • The assumption is that if price has broken the 23. we plot the Fib retracement ratios on the previous existing up trend.com . with the stop below the 61. • Hence.786 level. and if price does not break the 0. then the indication is that price should resume the up move again. then it has gathered sufficient momentum to resume the move in the direction of the existing trend.8 level. the probability of price moving back down to the 61. • In case of an uptrend.8 level is quite remote…….6 level should be considered to be the entry.

com . www. We project the price action forward. • Thus we are projecting the price action forward. Ideal situation to use in – • For estimating the price targets after the pullback is completed. using the last prominent moves. estimating that it will reach the fib levels. once it has crossed the Fibonacci retracement levels.Fib projections – • The Fibonacci projections are used to determine the expected price targets.fibforex123. we can use the last prominent down wave to determine the expected upside targets. • If we are anticipating price to begin an uptrend.

Plotting Fib projections – • The Fibonacci projection is calculated by taking two extreme points (usually a swing high and swing low) on the price movement and adding the key Fibonacci ratios of 1.618%. • Of all the ratios.618% levels hold a lot of importance.fibforex123.000% & 261. • Once price has crossed the levels of the swing high or swing low.8%. the 1.272%.com .272% & 1. www. 2. the above mentioned projection levels identify possible support and resistance levels. since they usually act as very strong levels of resistance / support. 1.

co m .fibforex123.Example of Fib projections – www.

www. The waves adhere to these ratios quite accurately.com .fibforex123.Elliot waves – Go hand in glove with Fib retracements & projections.

fibforex123.8% or 78. • Wave 3 would often be 200.The Fib ratios applied to Elliot waves • The Elliot waves always form within the parameters of the Fibonacci retracements and Fibonacci projections. • Wave 4 will very often retrace about 38. • Wave 2 is a sharp correction.8% of wave 3 by price distance.8% projection of wave 1 – wave 2 by price distance. • Wave 5 would often be 127.com . www.2% to 61.6% by price distance. which should retrace wave 1 by about 61.2% to 161.0% to 261. This last impulse wave 5 forms with reducing momentum thus creating a divergence setup.8% projection of wave 3 by price distance.

fibforex123.The Fib ratios applied to Elliot waves www.com .

com Please feel free to contact me about further information at: sunil@fibforex123.End • I hope this presentation can help you gain that extra ‘Edge’ over the market.fibforex123.net www.com .com shellcon@eth. but also implement the knowledge in the live market. • We don’t just teach. • Visit my website for more educational and practical information on the correct use of technical analysis. www.fibforex123.