4.20 Complementing Fibonacci Retracements with Trend Lines

 
Let’s see if we can whip up a potent mix using Fibonacci retracements with trend lines!
 
And why not? In fact we said before that Fib works best in highly trending markets, so using trend lines should be quite natural and correct. So yes, you can increase the chances of a winning trade by aligning Fibonacci retracements with trend lines. 
 
 
Here’s the method. Find a pair in a good trend, say an up move. If it’s in a good trend you can probably draw a line connecting the price bottoms – there you have the trend line to work with. Use the most recent rally to construct your Fib levels. See if any of the levels intersect with the upward slanting trend line. If they do, those are good levels to make a buying entry.
 
Ok, Ok, too fast? Let’s go through it again with a real example:
 
 
Trend line complementing Fibonacci retracement level on a Forex chart. 
 
 
The above chart is an example of the support trend line and Fibonacci retracement during an uptrend. In this chart the pair is trending up nicely with a series of higher and regular bottoms that line up to make a great trend line.
 
The red horizontal lines are the Fibonacci retracement levels constructed using the most recent price rally for the swing low and swing high points. Right away it is obvious that the 61.8%  level lined up with the trend line to come up as combined support.  See how the retracement stopped at the junction of the 61.8% Fib level and the trend line. This was a good place to buy! The subsequent price action just leaves nothing more to be said.
 
During a downtrend you need to look for a resistance trend line.
 
In case there is a breakout of the combined support or resistance then you need to turn your focus towards the next Fibonacci level. Let's also have a look on another Forex chart where there was a breakout from the combined support of the trend line and Fibonacci retracement level and the prices hit the next Fibonacci level:
 
 
Breakout from the combined support of Fibonacci level and trend line on a Forex chart. 
 
 

As they say, ‘the trend is your friend.’ Use Fibs to help you determine the best entry points.

 

   

Forex Trading Alerts subscription


Name:
Email:
Confirm Email:
6+9

We will send email alerts as soon as the Forex analysis is updated.
Request you to check the Junk (spam mail) folder immediately in case Google group mail is not received in Inbox.

Enter Forexabode Blog

Enter Forex Abode Community

Forex Rates