All language subtitles for 6. Examples - How to Trade Fibonacci Retracements and Extensions

In this video, we're talking about real life examples of Fibonacci retracement and extensions, so

extensions are a little bit different in the sense that it's not, you know, point A to point B and

where do you get in on a pullback?

This is more like where can you go?

As an exit.

Uses the same mathematics, you could pull it out of the same menu as the fibber treatment, you could

do the trend based BEB extension.

So, for example.

If you saw this move and you wondered, OK, well, where can we go?

You can click on this drag to that move.

Pull-Back.

And then what happens is.

One hundred percent of the MU.

Shows up, you know, the high point of the movie, you pull back and you're like, OK, I want to get

involved.

So where are some targets?

Well, the one point six one eight is by far the most common target you could see.

That's exactly where we eventually ended up.

But there's two point six one eight three point six one eight four point two, three, etc..

Now, this is just a simple guide as to where you could go later on down the road.

I will say that fib extensions are hardly ever used for anything other than short term day trading.

You know, some people like them, but they aren't as widely followed.

So the problem that you have with it is, you know, how I had discussed previously.

There's no real reason to believe that Fibonacci works other than people believe it works.

So it's a self-fulfilling prophecy because there are other types of Fibonacci.

There's like Fibonacci cycles, Fibonacci time cycles and probably four or five others off the top of

my head that I can think of.

But the reality is, is retracement is pretty much what people use.

The extensions, like I said, they give you an idea of where you can go.

So like on this 30 minute chart, the theorem, you know, if you miss this trade, well, you can see

that we pulled back and we hit one point sixty one before pulling back from there.

This is like I said, it's more or less a short term traders type of situation, because the reality

is by the time you get all the way up here on an extension.

Unlike a weekly chart, the fundamentals can change and the entire attitude of the market can clearly

change from there.

So take that for what it's well, what it's worth.

But you can see how it would have worked here quite nicely.

You know, you got involved perhaps on this pullback here on support and you're looking at it like,

OK, well, I want to see it where, you know, where can we go longer term.

This is a half an hour chart.

So it didn't take that long to get.

There was a handful of days, maybe about two weeks.

OK, so now that I have.

Explain that, let's take a look at Fibonacci retracement.

You know, like I said, it's much more common.

So the first thing that I see is.

You notice how we have rallied significantly in Bitcoin.

This is the hourly chart all the way up to forty two thousand.

So a lot of times what people will do is they'll see something like this and they'll say.

I want to get involved, but I don't want to pay up.

This is like going to the store, you know, if a TV is selling for, say, five hundred euros, five

hundred dollars, whatever your local currency is.

You know.

If it's suddenly 750, you don't want to run out and buy it, you want to buy it when it's 300 and that's

essentially what you're doing here with a Fibonacci retracement.

So if you're patient enough, you wait at the very least for the first Fibonacci retracement level and

there is the 23, but again, not as common.

Thirty eight point two is much more common.

And you can see it did react to that.

But the 50 is even more important in the sixty eight point sixty one point eight, of course, is the

golden ratio that everybody likes as well.

But the 50 is very popular.

And you can see and we'll talk about these later, but this is a double potom.

This means that we had approached an area to try to break through it twice and failed.

Well, it should not be a huge surprise that if they can hold it a couple of times that we have rally.

It's pretty straightforward stuff there.

So let's go ahead and clear that.

And let's take a look at a little longer term chart, so this is a four hour chart.

Now, this last leg up, that's not really the swing low.

So you need to really kind of pull back here and you can see.

That the thirty eight point two got hit.

Not a surprise that we ran into a little bit of resistance here at the top, that's pretty common.

But notice how.

We reacted pretty quickly.

That's a sign that we are going to continue going higher, so in this case, longer term, maybe you

do want to look at a Fibonacci extension.

So on the daily chart.

You can see, you know, this is going to show us the same thing.

You know, we could even go further and it doesn't take a whole lot to imagine that maybe the 23 held

there, but let's get rid of that.

And let's take a look at the monthly chart, and that's going to be straight up.

But you could, at least in theory.

Based upon the.

FIB extension.

Pull this out and then if you go over here, this side of the chart, you can shrink the range.

By holding and dragging.

So here's the thing, assuming that this is going to be the high, in theory, your target is roughly

sixty thousand and then ninety five thousand.

The problem with that is there are so many different things that could come into play between now and

then that it is really difficult to get.

You know that.

Kind of into the market to the point where you are simply going to.

Hold on for that kind of move.

It's very rare that you can do that with something as volatile as cryptocurrency is probably not too

wise.

So, again, that's why I would stick to extensions on short term chart.

So one way that a lot of people like using Fibonacci and I have to concur with this one is, you know,

you've got this move here.

And again, there's a 50 percent right, that we had just talked about.

But.

What happens if you draw another from this pullback, this impulsive move?

And what you'll get.

This is sixty one point eight at the same level, so that's what is known as a confluence, you have

a couple of different fib levels that people are paying attention to.

So there are some people that will look at this in the prism of this was the last and possibly higher.

So I want to draw it there.

There are the longer term ones that will look at it and you can see they all kind of come together there.

So that's exactly what you want to see.

That gives you double confirmation.

Again.

There's no 100 percent guarantee.

But it obviously gives you better odds because you have different groups of people looking at the same

thing, and that's that's one of the best ways to trade, right.

One thing that I would warn of against is trying to use Fibonacci for.

Countertrend moves, so, for example, we fell here pretty hard, right in Bitcoin and then bounced

significantly to the 50, but we didn't really go that far and just.

The traders got wiped out and, you know, the tried that, and the reason being is the entire trend

was starting to turn higher.

So Fibonacci really only works with the trend.

And to be honest with you, that's going to be true with most technical analysis.

That's not.

Solely a Fibonacci thing.

Now, here on Etherial, we can use short term charts as well.

To to look for trade, so let's go back to the February Treisman.

You can see this is clearly a swing low.

And we rallied here and pulled back.

Well, here's another thing that you will want to look for.

Their support there anyways, you can see that it had been supported multiple times, so with the fifty

or sixty one point eight percent Fibonacci retracement level and that support level, it's kind of hard

to think that it would have been a bad trade.

Even on a 15 minute chart.

You can see these things kind of come into play, so.

You know, again, this is confluent, we want as much confluences as possible, we want as many reasons

to take a trade as humanly possible.

There are other indicators that we will go through and they will also pile on to this, but at the very

least, you want to trade with the trend when you're using Fibonacci retracement and.

Extensions, but that goes without saying.

You want confluence, so in this case, I showed you an example of where we had to Phibbs A sixty one

point eight and a 50 tie together.

But you can also use other indicators and we'll to talk about those later.

And then, of course, you want to have a plan, you want to have a point where you say, that's it,

I'm out.

So let's talk about that.

Here's a fib pullback back to the 50 percent Fibonacci retracement level.

A lot of Web based traders would just put their stop loss behind.

The Fibonacci level underneath it, with the thought process, it either holds or it doesn't, right?

Now, if you want to use your extension's.

You could.

Lay this out and recognize that the market is trying to get to eighteen sixty one.

Based upon that.

Again, though.

A little less reliable than retracement.

So the extension, I use that.

In short term targets, typically, and to.

Kind of complement other Web based strategy.

But when you look at this.

You can see it was a nice setup and you could have just put it on the other side of the fence.

Some people will even take it your stop loss, that is, some people will take that protection order.

And then once we break above and we come back and we test the next fab, they'll put it right here.

You know, they'll just move it up right along with it and kind of let the market you know, we broke

broken about here.

I put it right here, kind of let the market tell you when it's time to get out.

Takes a lot of patience.

You know, this was over the course of a couple of weeks.

But really, the less you trade, the more money you're going to make.

Anyways, that's generally the case.

It's far too easy to over trade.

So I would warn against that as well.

So pretty basic stuff, there's there's not a lot to it, you just have to make sure you using swing

highs and swing lows, you know, you like I said, you just take the swing low in the case of an uptrend

to the swing high.

Click it there and you can see it.

Lay it out for you.

And remember, there are other levels, but I broke it down to the three that matter by far the most.

You know, once you once you start talking about like the twenty three and seventy eight, it's a little

esoteric typically what happens.

Is.

So when you get the sixty one point eight broken to the downside, not always, but typically that's

a bad sign.

So.

I'll pull up an hourly chart of Bitcoin.

And.

You can see that we do.

Kind of follow the trend all along, but if you are trying to short this market for whatever reason,

there's absolutely no reason to be short of this market.

But if you were on the other side of this trade.

Once you're past the sixty one point eight, you're in trouble, you know, you were your first sign

of problems were up here and now you're trying to take off beyond that.

So.

That's why I don't like the 70 generally, if you're going to give up roughly two thirds of the move,

you're going to give up the entire move.

That's just an observation thing.

Statistically speaking, once you're beyond half the move and then sixty one point eight, you know,

you're closer to the entry, meaning closer to losing money from the entry than you are making it.

So it's time to cut your losses and move along.

And there are enough Fibonacci traders out there that.

You will see them behave that way.

So here's here's one here, and it looked really good for a while, but notice how.

And over the longer term, it is against the trend, but notice, how had you taken this?

At first, the 50 held, 50 percent held and it looked like you're going to be OK.

But the fact that you couldn't reach the highs again, that was your first sign of trouble.

So in a way, Fibonacci, a failed Fibonacci return to the one hundred percent in and of itself is a

little bit of an early warning signal.

I mean, there were still plenty of time to bail out with a profit on this.

You know, this is an hourly charge, so you're talking two or three weeks and then you just get blown

out.

So that's something worth paying attention to as well.

You know, again, trading with the trends, really the only way to go, it makes your life so much

easier, even if that means you have to sit around and wait for the trade to set up.

That's something that unfortunately, a lot of traders don't have the ability to do.

So in the next video, I'll take a look at an indicator known as the Bollinger Bands.