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