Tag Archives: confluence

How Fibonacci Confluences Work In Forex Trading?

There is no doubt that markets move harmonically. Each move in any direction is somehow harmonically associated to some other move in past. As traders we should be able to recognise these moves and make use of them for our profits.

Fibonacci confluence is an area/zone where more than two Fibonacci levels are in close proximity with each other. This zone has high probability of trend reversal and hence can be traded. Fibonacci confluence along with structure create powerful trading opportunities.

For example take an example as below. The zone marked in red had multiple Fibonacci confluences making is perfect zone for an trend reversal entry.

It had:

  1. 3 Drives Pattern completion
  2. ABCD Pattern completion
  3. 1.272 Fibonacci extension from last retracement
  4. 1.414 Fibonacci extension from previous retracement
  5. 50.0 Fibonacci level of impulse leg

It turned out to be a winner as the trend reversed from this zone achieving all targets:

#GBPUSD LONG IDEAS (200 SMA, ABCD PATTERN, STRUCTURE).-2png

Most common and major Fibonacci levels are:

  • 38.2
  • 61.8
  • 78.6
  • 1.272
  • 1.618

Other minor Fibonacci levels are:

  • 23.6
  • 50.0
  • 88.6
  • 1.113
  • 1.414

However it is important to note that not all Forex pairs use just major levels of Fibonacci. They have their own personalities. For example EUR pairs such as EURUSD uses these levels more often

  • 23.6
  • 50.0
  • 88.6

In the example below a confluence of 127.2 extension of last retracement with 88.6 of impulse was good enough to give us completion of two targets.

#EURSD 15 MIN LONG-2

USDCHF also makes use of these levels.

So it crucial to understand their personalities and use their usual Fibonacci levels to find the confluence zones.

Good Luck.

-TradeYodha

 

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