FIBONACCI PIVOT POINT
Fibonacci instruments are very popular among traders in the currency market. The development of famous Italian mathematicians is widely used for analysis in preferred markets and trade, as well as on the Forex market. Fibonacci comes in a sequence, where each subsequent number is the number of the two previous ones – 2, 3, 5, 8 …
Definitions and construction features
Fibonacci Pivot Point is a built-in instrument on the popular MetaTrader platform. To apply points to charts on certain trading instruments, you need to select “Insert” – “Fibonacci” – “Fibonacci retracement”. There are many services that allow you to calculate the value of Fibonacci Pivot Points on the Internet.
Fibonacci Pivot Points are rather effective and are widely used to build different trading methods on Forex.
The net with Fibonacci points is being built on 2 pivot points. Significant extremes on the graph are better to be selected as points. First, you must determine the dominant trend, after which you must stretch between the minimum and maximum Fibonacci points. If the trend is upward, then the starting point (100%) is located at the minimum, and the final (0%) – at the maximum. If the trend decreases, then 0% will be suitable for minimum, and 100% – for maximum.
Use of Fibonacci Pivot Points in trading
As you know, every practically directed price movement is always accompanied by rollbacks and correlations. With the help of Fibonacci Pivot Points it is very convenient to determine the strength of trends in the Forex market, as well as to find resistance and support levels. In the case of the price approach to the Fibonacci pivot point you can predict the possible change in direction of movement. The initial level of correlation is:
More is correlation, less than is the strength of the trend.
After placing Fibonacci Pivot Points on the chart you can see how high the efficiency of this instrument is in finding important points. Usually, many of the important price levels are the same as Fibonacci Pivot Points. With the help of Fibonacci nets you can place Take Profit and Stop Loss orders. It is better to place a stop over the Fibonacci level, to avoid backing-out. To place Take Profit, you can use the expansion level. In this case it is better to place the order slightly closer to the level in order to increase the possibility for its implementation.
Despite the fact that this instrument is not possible to predict all price movements with 100% confidence. For example, prices do not always stop after a correction of 23% or 38%, and for some markets that are very (even 76%) ordinary rollbacks.
You must consider the features of a particular market, where you trade. If we talk about the Forex market, we can say that trading movements on currency pairs are often accompanied by serious rollbacks.
It’s better to use Fibonacci Pivot Points on charts from H1 and higher. The higher the time frame, the stronger will be the signal. You can place several Fibonacci nets on the chart to find the most significant level. To see the difference in it, enough to use different colors and thickness of the construction.