Fibonacci 61.8 an excellent level for binary options

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Fibonacci Retracement Binary Options Strategy – How It Works

Fibonacci Retracement is an innovative technical strategy based on the Fibonacci tool, developed to detect more stable retracements. Compared to the original Fibonacci usage, the new system is considered much more effective. This article will show you in detail how to apply this strategy to collect binary options trading opportunities.

What is Fibonacci Retracement?

As you already know, the Fibonacci trading tool is highly appreciated by many traders due to its accuracy in spotting bounces/reversals. It’s mostly applied to determine hard support and resistance barriers. Therefore, in that logic, let’s say you draw two Fibonacci retracements and see some overlapping levels, surely they are ‘stronger’ and likely to halt prices better than the separate thresholds, correct?

The good news is, both Fibonacci Retracement and Extension can be used in this way, and this technique could be applied to any financial assets, from currency pairs, commodities, indices to cryptocurrencies. However, in order to make this strategy work, you must know how to combine the Fibs correctly. Let’s review some practical trading examples to find out how to use this Forex Fibonacci strategy precisely.

How to use Fibonacci Trading Strategy?

Remember – the larger the trading time frame is, the more accurate the signals are.

Let’s say you are watching an uptrend. In a bid to identify the obstacles that prices may bounce at, you draw a Fibonacci retracement. The first point is the lowest point of the trend, while the final point is the highest swing high.

After having the first Fibonacci retracement, your work is to create a smaller one to seek the overlapping levels. The smaller Fib’s first point will be the nearest swing low (must be easy to look), while the final point is at the same place with the large Fib’s ending point.

As you can see, the 23.6% level of the large Fib is very close to the 50.0% threshold of the smaller one. That support area is highly reliable and sufficiently strong to force prices to retrace.

On the contrary, you can create a large Fib in a bearish trend by drawing from the highest point to the lowest swing low of the trend. The smaller Fib is made in the same manner as in an uptrend: drawn from the nearest swing high to the lowest swing low. Of course, the swing high must also be obvious.

Уровни Фибоначчи в торговле бинарными опционами

Одной из самых распространенных торговых стратегий является торговля от уровней. Линия сопротивления на графике соединяет ценовые максимумы, достигнув которые цена разворачивается и движется затем в противоположном направлении. Сопротивление говорит о том, что в этой области нет интереса к покупкам, предложение превышает спрос.

Линия поддержки образуется соединением прямой линией ценовых минимумов. Ниже этой области отсутствует интерес к продажам актива, спрос превышает предложение, цена разворачивается и идет вверх.

Пробой ценовых уровней говорит о том, что ситуация на рынке кардинально изменилась. Пробой линии сопротивления свидетельствует о дальнейшем движении цены вверх, преобладании покупок над продажами. Пробой линии поддержки, напротив, сигнализирует, что пора продавать, цена будет снижаться.

При трендовом движении уровни образуются на точках разворота. Движение цены в восходящем тренде сопровождается откатами цены вниз. При нисходящем тренде цена корректируется верх. Глубина коррекции зависит от силы тренда и рыночной ситуации.

Для того чтобы определить потенциальные уровни поддержки и сопротивления при откате цены, используют линии Фибоначчи. Данный инструмент встроен в стандартные настройки практически всех терминалов. Уровни Фибоначчи определяют потенциально возможные зоны, где коррекция может закончиться и возобновиться движение в направлении тренда и выражаются в процентах от того расстояния, что прошла цена от начала тренда до момента начала отката.

Первый уровень 23,6% — не является сильным и цена, пробив его, корректируется дальше.

Следующий уровень — 38,2% — сильный уровень, на нем часто коррекция заканчивается и возобновляется трендовое движение.

Уровень 50% также очень сильный, и вероятность отбоя от него очень высокая.

Уровень 61,8% достигается ценой гораздо реже. В случае его пробоя, тренд может не возобновиться, придется констатировать факт изменения направления движения цены.

При торговле бинарными опционами линии Фибоначчи используют для определения точки входа в рынок в сочетании с другими индикаторами — скользящими средними, осцилляторами или сигналами Price Action.

Покупка опциона Put. Цена откорректировалась до уровня 38,2, затем развернулась. Сигналы RSI и ADX подтвердили возобновление нисходящего движения.

Покупка опциона Call. Цена отбилась от уровня 61.8 и развернулась в направлении тренда вверх. Возобновление восходящего движения подтверждается сигналами RSI и ADX.

Линии Фибоначчи можно использовать на любых таймфреймах, но более мелкие интервалы дают много ложных сигналов. Поэтому оптимальными временными интервалами будут Н4 и выше.

Three Fibonacci Rules For Binary Options Traders

Fibonacci Retracements are a very useful tool and one that is part of my regular technical analysis. This tool is one based on thousands of years of mathematical observations originating in ancient Indian mathematics. Although he did not invent the number Fibonacci did a lot to bring it into widespread knowledge in middle aged Europe. The Fibonacci number, or sequence, is a derivative of the Golden Ratio and a phenomenon found throughout nature. The Golden Ratio has been used to describe the number and pattern of leaves on a tree, diamonds on the skin of a pineapple, the ratio of your arm span to your height and the movements of the markets. During the Renaissance the master artists used the ratio, and the Fibonacci Sequence, to lay out their greatest works. The ratios inherent in the Golden Ratio are inherent in nature.

Fibonacci Retracements are most often used by traders to predict areas of support but they can also be used to predict potential targets for resistance as well. For those of you who don’t know what Fibonacci Retracements are here is a quick primer; the Golden Ratio is used to divide rallies and bear markets into “retracement” levels. There are 6 levels; 23.6%, 38.2%, 50%,61.8%, 78.6% and 100%. Each rally or decline is measured from the tip of the high to the tip of the low (for a bear market) or from the tip of the low to the tip of the high (in a bull market). The Fibonacci tool uses that measurement to project the retracement levels onto the chart. Once projected the levels can be used as targets for pull backs, corrections, snap backs and reversals.

Using Fibonacci To Trade Binary Options

So, how do you apply Fibonacci for trading binary options. Simple; use them as potential areas for signals to form. A Fibonacci in and of itself is not really a signal, it is merely an estimation of where the market is likely to do something such as form a signal. What that something is will not be know until the market does it.

  • Fibonacci Rule For Binary Options Traders – A Fibonacci Retracement Level is not a signal, it is a level where a signal is likely to occur.

Let’s look at the chart below. A major decline in gold stocks occurred at the same time as a decline in gold prices began. Barrick Gold was not immune to the sell off. There was a high in September 2020, this is where I will start my retracements. The stock’s most recent bottom is in early July so that is the point to which I measure for the retracements. The first thing that I notice is that the 23.6% retracement of the bear market emerged as a potential support/resistance line even before the decline hit bottom in July. Second, in the four months since the stock hit bottom it has tested that same resistance level four times and failed. That is four potential trades for savvy binary options traders using the daily charts and a sign of future bearishness.

Now, looking at the same chart of daily prices, we can make some other analysis as well. Each level of the retracements can have different meaning. On this chart the 23.6% level is important because it can reinforce the underlying trend. If the trend is down and prices retreat to the 23.6% retracement and are repelled then the underlying down trend is likely to continue. On this chart, since prices are not able to break said level we can assume they won’t at this time and that prices will at least retest the most recent bottom.

We can see this technique using the same chart with different retracement levels. If we redraw the Fibonacci retracements using the bottom that formed in late March it becomes somewhat obvious. Prices hit the bottom, bounced higher and were not even to make it as high as the 23.6% retracement before bearish topping signals emerged around the 30 day moving average. Prices then continue moving lower and then gap below the 0% line without even testing it.

  • Fibonacci Rule For Binary Options Trading – A signal that occurs at a retracement is stronger than one that doesn’t. But that doesn’t mean that a strong signal won’t occur between two lines.

Now, referring back to the retracement levels themselves, let’s talk about the importance of each line a little more. I touched base on how a bounce from the 23.6% line was potentially trend continuing, a break through that line is sign of a stronger reversal. Once prices break through a Fibonnacci line the next target is the next Fibonacci retracement level. Each retracement level that gets broken makes it more likely the next will be tested. A break below the 50% line makes full retracement of the original rally or decline highly probable.

Fibonacci Retracements For Short Term Trading

Looking at the chart below of 60 minute candlesticks I have applied a Fibonacci to a recent near term rally. The bounce from the bottom was very strong and provided several opportunities to trade short term binary options with expiries ranging from one hour to a few days or a week. Each time the asset price moved higher it moved above the retracement level with little to no resistance until hitting the top of the measured range. Notice how the asset provides an entry point at or just above each retracement level it is broken.

  • Fibonacci Rule for binary options traders – Once a Fibonacci Retracement level has been broken the next retracement becomes the target. The stronger the move above the previous retracement the more likely the move will continue in the same direction.

Plotting the Fibonacci Expansion Levels

Video Transcription

Welcome to the third lesson of the Day Trading One Touch Options course. On this lesson, we will learn how to use the Fibonacci expansion levels to calculate how long the continuation wave will be.

By doing so, we will learn how to calculate the target area and the turning point of the next correction, so we will have a range and the strike price of our one touch options would have to be, inside of this range, in order for us to take it.

But let’s go ahead and learn how to use it. Now that we know how to look for a full correction zone, we need to know how to calculate the targets of the correction. The targets of the correction are the turning points of the next correction.

The meaning that the target of a corrective move are the end of the continuation move, which is the end of the next corrective move. By calculating the target of the correction, we are calculating the length of the next wave, and by knowing the length of the next wave, we know the range that the strike price of the one touch option has to be in, in order for it to be profitable to trade.

If we know the length and turn around levels in the next wave, we can trade one touch options with much more confidence. If the strike price of the one touch is outside this range, it’s unlikely that price will hit it in this move.

And of course, it’s illogical for us to trade a one touch option that has a strike price that is above or below the range that we have already calculated. And if price is too close to the target zone and we are just at the full correction area, we might not take the trade because it might not hit in time for the expiration.

Now let’s go to the charts and continue our work on the Euro/US dollar. Now this is where we left off. Remember guys, that we have already calculated the full corrective area right here, around the 35.81 level, which is also the 50 Fibonacci level or the 50% retracement of the entire move up. And that also confluences with previous support that was rejected with this double spike low.

Now what we need to know, not that we know that this is the full corrective level, what we need to do is calculate the area of the price might reverse for a new corrective move.

Remember that price works or moves in cycles or waves. This will be wave number one. This will be wave number two or the corrective wave. And we are looking for the top of wave number three. We can’t know that without using the Fibonacci expansion tool. And what we’re going to do is we’re going to draw the expansions of this move, okay. Just let me find out where . . . It’s right here.

This is the expansion levels of this move. The corrective area is in the middle or in between the 50 and the 61 level. Or the 60 and 61 retracement level. So we are going to look for a strike zone around the 161.8 Fibonacci expansion. Okay?

Now this is the squares that we used on the previous lesson to let you know which highs we were taking out in order for us to correctly assess that this was, in fact, the corrective move that we were looking for. But now we are going to use it just as strike zones of this 161.8 expansion level, and this one we will use to let you know which is the actual corrective zone.

What you need to do is first draw your Fibonacci retracement levels once we hit the full retracement zone, which is this one. We use the expansion tool, the Fibonacci expansion tools and we draw the expansion levels. Remember that if we retrace in between the 50 and the 61.8% we will be looking for a possible target area of a Fibonacci expansion 161.8. Okay?

Now that we know this, if we are right here at this area and our price is between these two areas, meaning that, if it’s not higher than 38.10 and not lower than 35.10, we can actually take the trade. Okay? As you can see, if we go candle by candle, price continues to move up until it strikes with the 161.8.

Now remember that this is for our chart and this is just an example, but this works in the one hour, the four hours, the 15 minute and whatever time frame you want to analyze price action on.

So as you can see, we have retraced it to the 50 level, in between the 50 level and the 61.8 level and we have hit the 161.8 level as a target. This is actually how you prepare in order to trade one touch options. First you look for a swing low and a swing high. If we are in an uptrend of course, a swing high and low. If we are in a downtrend, you use the Fibonacci retracement levels.

You look for a fully corrective zone and then you plug in your Fibonacci expansion levels and if the strike price is reasonably between these two zones, or these two zones here are in between this range, we can take the trade. But this is only the preparation. On the next video we will actually see how to choose the correct option to trade.

More About Adam

Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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