The fibonacci tool is not applicable in all market condition of the forex market and that is because there is a particular market condition where is can work and there are a whole lot of others where it cannot work. It is important to know this because applying the fibonacci tool under the wrong market condition will not bring about the desired effect.
If the fibonacci tool should not be used under all market settings, what is the right setting for it to be used? The most favorable time to use the fibonacci tool for maximum production in the forex market is when the market is trending. A trending market is one where the currency price is perceived to be moving in one continuous direction over time. The market is said to be bullish if it is trending upwards, and bearish if it is trending downwards. Using the fibonacci calculator at a time the market is trending is based on the idea of going long (buy) when the market is trending up at a fibonacci support level, and to go short on a retracement at a fibonacci resistance level when the market is trending down.
FIBONACCI RETRACEMENT LEVELS
To enter the forex market with the fibonacci retracement, it is important to find the fibonacci retracement levels first and then apply it when entering the market. To find the fibonacci retracement level, you will have to find the recent significant swings both in the upward direction and downward direction; that is the swing high and swing low. The first to come among the swing high and low values is determined by the trend of the market. For a downward trend or a bearish market, click on the swing high value and drag it with the cursor all the way to the swing low value. For an uptrend market or a bullish market, click on the swing low value, and drag it all the way to the swing high value.
It is pretty simple procedure applying the fibonacci calculator to the forex market. These simple steps, when carried out tell the trader when to enter the market with the view of a profitable trade. When these points are revealed, the trader can then enter the market and trade accordingly. Entering the market is just the initial step as there are other things that are required of a trader as the trade proceeds.