How Do I Trade Retracement on Downward Trend
How Do You Draw Fib Retracement for Downtrend?
The fibonacci retracement indicator is placed on a chart in an downwards trending market and this Fib Retracement indicator then calculates the retracement levels for the downward trend on the charts. Fib retracement levels indicator is used by many traders as a trading retracement trading indicator.
In the Retracement Method example shown & described below the market is moving down-wards between chart point 1 and chart point 2, then after chart point 2 the price then retraces up to 38.2 percentage% retracement area then it continues moving downwards in original downward trend. Note that this Fibonacci retracement indicator is drawn from point 1 to point 2 in the direction of the trend (Downwards Direction).
Because we recognize this is just a pull-back depending on the trading chart trend we put a sell order at 38.2% Fib retracement level and a stop loss just above 61.8% Fibonacci retracement level.
If you had put a sell order at the 38.2% Fib retracement level as displayed on the trade below you would have made a lot of pips afterwards after the price reached the 38.2% Fib retracement level & then resumed the downwards trend.
In this trade the pullback of price reached 38.2% Fibonacci retracement area & did not get to 50.00% Fibonacci retracement level. It is always good to use 38.20 percent Fib retracement area because most times the price retracement does not always get to 50.00% Fibo retracement level.
How Do I Trade Price Retracement on Downward Trend - Fibo Retracement Levels on Chart
Explanation for the Above Gold Fibo Retracement Method Example
The above Fibo Retracement Method examples is a retracement set up where the price retraces immediately after touching the 38.20% Chart Fibonacci Retracement Level.
This Fib Retracement area provided a lot of resistance for the price pullback, this was the best place for a trader to set a sell limit order as a market quickly headed downward after hitting this 38.2% Fib retracement level.
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