FIBONACCI

RETRACEMENT
TRADING TOOL
Learn the basics of the fibonacci retracement
tool and how to apply it to your charts.

BRAVE FX ACADEMY
FIBONACCI RETRACEMENT

TRADING TOOL

There are different types of Fibonacci tools, But we would be paying

more attention to the Fib retracement. Before we go deeper, let's
understand what a retracement means when trading.

RETRACEMENT

This term in trading is often used to describe a minor pullback in

price after a bullish or bearish move or trend.

These pullbacks / retracements are temporary in nature and do not

indicate a change in the main trend. Price usually continue in their
normal trend direction after a retracement.

Take a look at the chart on the next page for a clearer

understanding
CHART RETRACEMENT

BEARISH TREND

Trend
Continuation

Trend
Continuation

Bullish Bullish
Retracement Retracement

Bullish
Retracement

Here's a bearish trend with examples of retracements and then

trend continuation. This is how retracements work
FIBONACCI RETRACEMENT

TRADING TOOL

The fibonacci retracement is meant to be used as a tool to spot

possible support and resistance levels during price retracements in
a trend (Bullish or Bearish).

These Support and Resistance levels are then used as possible buy
or sell trade entries. They can also be used as take profit (TP) and
stop loss (SL) levels.

NOTE:

The most significant fibonacci levels are the 38.2%, 50% and 61.8%
level. Those are the retracement levels to watch out for.

Let's take a look at how to place the fibonacci retracement tool on a

bearish and bullish trend.
HOW TO DRAW THE

FIBONACCI RETRACEMENT
ON A BEARISH TREND

Fib Point one at the swing

high

Fib Point two at the

swing low

For accurate results, the first point of the fibonacci tool is place
on the swing high of the bearish trend and the second point
on the swing low of the trend
HOW TO DRAW THE

FIBONACCI RETRACEMENT

ON A BULLISH TREND

Fib Point two at the

swing high

Fib Point one at the

swing low

For accurate results, the first point of the fibonacci tool is place
on the swing low of the bullish trend and the second point on
the swing high of the trend
FIBONACCI RETRACEMENT

IMPORTANT NOTE

We would take a break here as this is just the first part. In Part 2 we
will discuss more about taking trades with fibonacci as well as how
to set TP and sL.

For an up trend, you draw the fibonacci retracement by placing

point 1 at the swing low and point 2 at swing high of the trend

For a down trend, you draw the fibonacci retracement by placing

point 1 at the swing high and point 2 at swing low of the trend

The fibonacci retracement tool can be used to take trades and

also set potential TP and SL levels

Pay attention to the 38.2%, 50% and 61.8% level, they are the
most important levels
TRADING WITH

FIBONACCI RETRACEMENT

The fibonacci retracement tool works for confirming trades based on

trending markets

The logic behind this is that the fibonacci retracement helps you find
suitable support levels to go long & resistance levels to go short.

We'll be dealing with the following in this lecture:

Going long & short With Fib Retracement

Setting TP & SL With Fib Retracement

NOTE:

Fibonacci Retracement is meant to be used only as an extra layer of

confirmation for your trade setups not as a signal for trade entries
GOING LONG WITH

FIBONACCI RETRACEMENT

The first thing that comes to mind looking at an

uptrend is that we want to take BUY trades. Then the
next step is when do you go long?

Ideally we would be going long the next

time price bounces off our bullish trend line

Bullish Trend Line

This is where the Fibonacci Tool comes in to verify if

we should go in for a buy trade or not

We drew our fibonacci by placing the first point

at swing low and second at swing high
GOING LONG WITH

FIBONACCI RETRACEMENT

Swing High

The 38.2% Fib level Aligns perfectly with our trend line,
thus boosting our confidence in taking the BUY trade

STOP LOSS

We Buy

Swing Low We go long at the bullish bounce and set SL at

Next FIB level which in our case is the 50% FIB
level and TP above swing high
GOING LONG WITH

FIBONACCI RETRACEMENT
Take Profit

And there you go, TP was crushed. The Fibonacci tool

has to be merged with chart patterns or price action to
be considered for trade entry.
Swing High

STOP LOSS Buy Entry

GOING SHORT WITH

FIBONACCI RETRACEMENT
Swing High

On a down trend, we look forward to taking sell trades. In

our case, the next possible location for a SELL trade is at
the nearest resistance level as marked on the chart

Resistance Level

To verify our resistance level, we put on the fibonacci tool.

Point one placed at swing high and point 2 at swing low.

Swing Low
GOING SHORT WITH

FIBONACCI RETRACEMENT

Swing High
Our Resistance level aligns with the 50% fibonacci level, a
very strong level. This further validates our resistance level
and downward trend for going short.

STOP LOSS
Sell Here

We go short at Resistance and set SL at the upper

Fib level which is the 61.85% level in our case. TP is
placed below swing Low

Swing Low
GOING SHORT WITH

FIBONACCI RETRACEMENT

Swing High

STOP LOSS Sell Entry

And there you go, that's how Fibonacci is used for

trading. never rely on fib alone. it works better on
trends and with important levels
FIBONACCI RETRACEMENT

TRADE TIPS

Never trade or rely only on fibonacci level. They must be combined

with important patterns and price action to be considered for
trading.

For a down trend, you draw the fibonacci retracement by placing

point 1 at the swing high and point 2 at swing low of the trend

For an up trend, you draw the fibonacci retracement by placing

point 1 at the swing low and point 2 at swing high of the trend

Pay attention to the 38.2%, 50% and 61.8% level, they are the
most important levels

The fibonacci retracement tool can be used to take trades and

also set potential TP and SL levels