Problem: For most aspiring traders, the journey into the world of trading can be intimidating, especially when funds are limited. It is not possible for everyone to buy expensive indicators and tools. Most traders want to learn effective trading strategies without additional costs.
Platform: Fortunately, platforms like TradingView offer free powerful tools, which can be used to execute strategies with minimal financial investment. Among these tools, Fibonacci retracement levels are a reliable method to identify potential entry points in the market.
This will be a pretty simple yet potent way to get you to leverage Fibonacci retracement levels for free in your trading. With such knowledge and understanding, you should be able to optimize your trading decision and maximize return on investment.
Understanding the Fibonacci Retracement
Fibonacci retracement is one of the most popular technical analysis tools. It helps a trader identify possible reversal levels in the market. With the price movement, it can be used to predict where the price will retrace before continuing in the direction of the trend.
Setup Your Chart
1.To get started, follow these steps on TradingView
2.Choose the Fibonacci Retracement Tool:
3.Go to the toolbar on TradingView and click on the Fibonacci retracement tool
4.Identify Key Swing Points
5.In the downtrend drag the tool from the top of the swing to the bottom.
6.In the uptrend drag it from the bottom of the swing to the top.
7.Focus on Key Levels
The most important levels of Fibonacci are 38.2% or 0.382 and 61.8% or 0.618. These often are considered a reversal zone.
Optimal Entry Points:
Finding the best entry point during a retracement can be challenging. Many traders wonder whether to rely on candle formations or other signals. A straightforward, free solution is to use Heikin Ashi candles on.
Switch to Heikin Ashi Candles:
In the candle settings, select Heikin Ashi. These candles help smooth out price action, making it easier to identify trends.
Look for Candles Without Upper Wicks:
Once the price retraces to a Fibonacci level and the Heikin Ashi candle has no upper wick, enter trades. This shows strong downward momentum in a downtrend or upward momentum in an uptrend.
Handling Your Trades
The deeper the retracement, the better the risk to reward ratio is
Examples:
38.2% retracement may give 1:1 ratio
50% retracement might give 1:1.9 ratio
61.8% retracement might give 1:4 ratio
Setting Targets
1.The safest target is the zero level, where the price initially reversed.
2.For higher potential profits, consider Fibonacci extensions such as 1.618 and 2.618 levels.
3.Practical Application
4.Identifying a Strong Trend:
5.Ensure there is a significant impulse move before applying Fibonacci retracement.
6.Drawing the Retracement Levels:
7.Accurately draw the retracement from swing high to swing low in a downtrend and vice versa in an uptrend.
Entering the Trade
1.Wait for the price to reach a Fibonacci level.
2.Verify with Heikin Ashi candles if the lower wick was absent.
3.To Get Out
4.Conservative targets can be established at the zero level.
5.Other targets can aim at Fibonacci extensions.
Tips for Success: Have patience and control your emotions in order to have discipline. Price has to confirm major levels while entries are done through Heikin Ashi candles.
To achieve consistency and more confidence with regards to plotting of Fibonacci, regularly practice this in drawing some lines and marks while identifying areas to enter trades.
Risk Management: Set stop-loss orders at all times and manage risk to protect capital.
Mastering Fibonacci retracement trades can boost your trading performance significantly. Utilizing free tools on platforms such as TradingView, you can develop a solid trading strategy without expensive indicators. Remember to keep your focus on key Fibonacci levels, confirm your entries with Heikin Ashi candles, and manage your trades effectively. With practice and patience, you will be successful in your trading journey.