Learn How to Apply Fibonacci Retracements to Your Trading

February 9, 2012

Elliott waves often correct in terms of Fibonacci ratios. The following article, adapted from the eBook How You Can Use Fibonacci to Improve Your Trading, explains what you can expect when a market begins a corrective phase. Learn how you can read the entire 14-page eBook below.

 


Retracements — Corrective Waves

If we look on the left side of this chart, we see a diagram of wave 1 followed by wave 2. It is common for second waves to retrace .618 of wave 1 — thereby making a deep retracement. We will also be looking for .786. We might often see .5, 50%, but .618 is common. On the right side, fourth waves will commonly retrace a smaller percentage or .382 of wave 3. We might also see something like .236.

Examples

I have put the wave count on this chart of the S&P 500. We have waves 1, 2, 3, 4 and 5. Wave 2 is an expanded flat. Wave 4 is a zigzag. Let’s look at the retracements that waves 2 and 4 make.

We see that wave 2 makes a deep retracement. It comes close to .618. Look at this Fibonacci table that I put up; notice that I put .382, .5, .618, and .786. .618 is 1087.75, and the S&P low is 1090.19.

We see that wave 4 makes a shallow retracement of wave 3. It goes just beyond the .382 retracement. .382 is 1169.1, and wave 4 actually bottoms at 1163.75.

In a nutshell, this is what we mean when we say that Elliott waves often correct in terms of Fibonacci ratios.


Learn How You Can Use Fibonacci to Improve Your Trading

If you’d like to learn more about Fibonacci and how to apply it to your trading strategy, download the entire 14-page free eBook, How You Can Use Fibonacci to Improve Your Trading.

EWI Senior Tutorial Instructor Wayne Gorman explains:

Publication source
ForexCycle information  ForexCycle reviews

November 23, 2016
XM Returned to Budapest with a Free Forex Seminar
In the past few years, the Hungarian capital, Budapest, has often been the venue of free seminars hosted by XM, with the latest such event having been held on 19th November...
November 15, 2016
Latest XM Seminar Accomplished in Cairo
On 12th November this year, XM visited Cairo, Egypt, to host a new forex seminar for XM clients interested in learning about some of the most efficient swing trading techniques...
November 11, 2016
XM Seminars Held in Thessaloniki and Athens
Tradepedia Certified Financial Technician Avramis Despotis, accompanied by XM team members, visited two different locations in Greece this November with a free seminar for XM clients...

FBS Rating
Trade360 Rating
OANDA Rating
FxPro Rating
Fort Financial Services Rating
FIBO Group Rating

OptionRally Rating
Empire Option Rating
EZTrader Rating
OptionFair Rating
Grand Option Rating
TropicalTrade Rating