Posted by forex at 12:52 AM
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1. Open the chart and select the instrument (currency pair) along with the time frame to trade. e.g. EURUSD 15 min. chart.
2. Go to the list of indicators within the charting software and select Fibonacci and then Fibonacci retracements or extensions as required.Fibonacci levels work best with trending charts. If the selected currency pair is ranging within close levels at the time of trading, fibonacci ratios may not be effective.
3. Select the extreme high and the extreme low of a major trend as connecting points to draw the main fibonacci line. Draw the line so that fibonacci levels will be automatically calculated within the chart.Fibonacci retracement ratios are 0.236, 0.382, 0.500, 0.618 and 0.764.Fibonacci extension ratios are 0, 0.382, 0.618, 1.000, 1.382, 1.618.
4. Redraw the fibonacci levels in a different time-frame of the same currency, if the chart seems to be out-of-sync with the fibonacci levels.