In the previous chapter we learned about the combination of Fibonacci Retracements with support and resistance, and on this occasion, as we promised we will continue to discussing to use Fibonacci Retracement with trend lines.
Another excellent strategy for a combination of Fibonacci retracement is a trend line.
One of the advantages of Fibonacci retracement levels is that this tool can work well when market movements are trending, so this makes sense.
But you need to remember that every time a pair an uptrend, traders can use the Fibonacci retracement level as a way to enter the forex market.
So why not look for levels where Fibonacci levels come in relation to trend lines.
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Combination of Fibonacci retracement with trend lines
Take a look at the image below.
The image above is a pair of AUD/USD that is in an uptrend for several days using a 1-hour timeframe, using the trend line you start drawing trend lines from lower low to higher low.
As you can see, where prices have crossed a short-term trend line for several days.
You would certainly think, that this is a sign of an uptrend that is as very sweet trending market as I want.
I will open Buy AUD / JPY, even if only with a short-term trade, and will definitely open long/buy positions if price touches the trend line again.
But before you do that, why don’t you try to use the Fibonacci retracement?
This is a good tool and by combining with trend lines, it is more accurate to determine entry points.
Let’s see if we can get a better price entry.
Example trade Fibonacci retracement level with trend lines
Take a look at the next image below
We take the Fibonacci tool and look at prices that occur more accurately.
We attach Fibo retracement levels with swing lows at 82.61 and swing highs at 83.84.
Then notice how the 50.0% and 61.8% Fibonacci levels intersect with the rising trendline.
Is that the best support area for open positions? let’s look next with this Fibonacci and trend line.
What happened later? The 61.8% Fibo levels were reached because prices bounced there before returning to the top
If we place an order at that level, that means our entry order is correct!
A few hours later after touching the trendline, prices also soared and continued to rise above the swing high.
Now, isn’t it cool to try a tool like this? As we can see, the Fibonacci tool is very useful, even when we plan to enter the trendline retest.
The combination of the level of resistance support from both the diagonal and horizontal lines can be interpreted that other traders are watching the same level as us.
But don’t forget, like other drawing tools, trendline drawing can be very subjective.
We never know whether other traders draw the same lines as our lines.
But one thing is certain, the trend is forming! If a trend is being formed, we must immediately realize that there is a golden opportunity to make a profit, one way is to use the Fibonacci tool to find out potential entry points.
Why use a Fibonacci retracement with a trend line?
Forex strategies do have a variety of ways to use, why combine the use of Fibonacci retracement with trend lines?
Similarly, with support and resistance, this method is to minimize the risk of entering the market so that it will only enter when both tools provide the same direction signal.
If you only rely on the trend line alone, chances are you will be more active to enter the market, when prices touch the trend line you will buy then.
But the potential for mistake is also still there, as well as if you only use Fibonacci Retracement itself, the bias of mistake may still occur more.
But by combining the two, this will give fewer signals that appear but the accuracy is much better.
It’s just to use this strategy maybe between traders can be different ways to draw trend lines and in determining the swing high and swing low to draw a Fibonacci retracement.
So to get more experience, you have to do a lot of trials, with a demo account is also good for honing your trading skills.
While the trend line is a simple tool, it is also popular among technical traders because of its simplicity is still the best tool as an analysis tool.
In practice, you may only use your own Fibonacci retracement and also use the trend line alone.
But the choice is yours, if combining a Fibonacci retracement with a trend line is a powerful and potential tool for collecting profits, this will be much better even if you rarely find a signal.
And what needs to be realized in forex trading is about trading quality and not trading quantity.
One quality position will provide maximum profit than many positions but mostly get lost, this will be useless.
It’s, forex lessons about the combination of Fibonacci retracement with the trend line, you can start trying to use a demo account before with a real account.