In the previous chapter you learned how to combine Fibonacci Retracements with support and resistance and also Fibonacci Retracements with trend lines, in this chapter we will continue to discuss how to use Fibonacci Retracements with Japanese Candlesticks.
In the previous chapter, we learn more anything related to Japanese candlesticks, if possible you have forgotten a bit, it’s good to look back and relearn.
Basically, by using a Fibonacci retracement analysis with this Japanese candlestick, we will look for a complete candlestick pattern, or candlestick exhaustive, it`s mean deep candlestick
If you have been able to determine when the buying and selling pressure runs out, that means we will also get a clue when the price will continue trending.
Henceforth, we will use the term “Fib Stick” to make it shorter.
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Combination of Fibonacci retracement with Japanese candlestick
Read also Japanese candlestick patterns summarized
Indeed, by using the Fibonacci retracement indicator, this is a good tool, but as in a football game, teamwork will give more strength to defeat your opponent, Cristiano Ronaldo is a star player, but he can’t play alone on the field.
With the support of friends in the team, which provides an opportunity for Ronaldo to score against the opponent
Likewise, with the Fibonacci retracement, it is a good tool, and it will work even better if other supporting tools contribute to the game.
If previously with a combination of support and resistance, then with the trend line, maybe this will give different results, because of different supporting tools.
This time we will give an example of how to combine a Fibonacci retracement with a Japanese candlestick.
Example trade
We take the example of the EUR/USD pair with a 1-hour timeframe, take a look image below
The chart above is a picture of EUR / USD that is in a downtrend but the movement seems to stop for a moment.
Will there be an opportunity for entry with a downtrend like this?
Well, By combining Fibonacci tools with candlesticks, to help our trading.
From this chart, we take swing high on March 3 at position 1.3364 and swing low on March 6 at position 1.2523.
Let’s just say, we are trading on Friday and want to determine when we should re-enter after the weekend if the graph is like that.
It turns out that when we reopen our chart after the holiday weekend, the EUR/USD pair made a jump from the closing price last Friday.
While the Fib level of 50.0% is still, buyers end up taking a higher pair.
We decided to wait and see if the 61.8% Fib level can be reached.
In the end, the last candle was bullish beautifully and maybe just the price will continue to rise.
What next?
Well, have you seen the graphic image above? A long-legged Doji appeared on the 61.8% Fib level.
How to remember no, what does a case like this mean?
Yup, this is what is called exhaustive candle or deep stick candle.
Then, has the buying pressure decrease?
Is resistance formed at Fibonacci levels?
Yes, could be. Traders may also be watching Fibonacci levels
Is it time to be short? Because we do not know the exact answer, so we must apply risk management, but judging by the graph the possibility of a reversal seems quite convincing.
If you open a short position and liquidate right after the Doji is formed, the benefits we get will be quite maximum.
Shortly after the Doji, prices stopped briefly before finally falling down.
And look, the candles are all red, this means that the close price is lower than the open price and the buyers seem to be tired enough, so the sellers jumped and took control.
Finally, the price went back down to swing low and that means, a movement of 500 pips! Big accumulated profits that make you rich!
Why Fibonacci retracement with Japanese candlestick?
Looking for “Fib Sticks” can be very useful.
Considering that Fib sticks giving the signal to us whether Fibonacci levels will be formed or not.
If we feel that prices are stretched out at Fibonacci levels.
It means that it is possible for other traders to place orders at these levels.
Things like that we can make as further confirmation that there is support or resistance in the price area.
Another nice thing about this Fib Stick is, we don’t need to place limit orders at Fib levels.
We only need to pay attention to whether support or resistance will occur since we monitor the “zone”, without needing to know the level specifically.
Feel like you have a hidden talent for using candlesticks? Here is the time to show the ability.
We can wait for the Fib Stick to be formed directly below or above the Fib level.
So we can get further confirmation whether we have time to enter an order.
If the Fib Stick is not formed, then we just have to trade at market prices.
Because now we already have some confirmation about which levels can be formed.
Final Thought
The golden ratio of Fibonacci retracement is a powerful tool for finding support and resistance zones.
By combining the Fibonacci retracement with the Japanese candlestick.
This will make your trading method more likely to have a high probability of getting a market entry confirmation signal.
But to combine with Japanese candlestick, you must understand and know the candlestick pattern which is a reversal signal.
But if you are unable to remember reversal candlestick patterns, you can find candlestick indicators to help identify candlestick patterns that are formed.
By using a free forex candlestick pattern, you will not be bothered to think about whether this pattern or pattern.
Because every candlestick pattern appears automatically you will get a notification from the trading platform through the indicator.
All you need to do is download the indicator then attach it to the trading platform.
However, in using all trading systems, either with Fibonacci with support and resistance, trend lines or with Japanese candlesticks.
You will never know where the next price will move.
Therefore it is advisable to remain disciplined with risk management.
This is a way to survive uncertainty, you can use stop loss and proper position size
Stop loss will prevent something suddenly changes the market like a politics event
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