Fibonacci 61.8 an excellent level for binary options

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Fibonacci 61.8 an excellent level for binary options

Dear lovers of binary trading, here we are again with another interesting trading strategy that is giving excellent results, so I’d like to share it with you. As always we are trying to find strategies that put aside the trader’s emotionalism in order to be applied with a certain precision as soon as the signal we were looking for develops. As everyone knows, the psychological factor affects traders a lot and we should minimize this influence. We can do it only if the strategies we are applying result effective with a certain frequency. Well! Now, let’s start from Fibonacci.

In the past I already told you how Fibonacci retracements are really a fantastic tool to try to suppose how markets can evolve in some circumstances. To review these strategies with the relevant and very precious comments, write “Fibonacci” in the inner search form of our blog here on the right.

Now let’s focus on the heart of the strategy. The title I gave to this post is very clear. Practically we should find a good “branch” of trend to which we will apply Fibonacci and check on several time frames if we are approaching the value of 61.8% in order to open a rebound transaction exactly on the level 61.8.

Let’s have a look at the following images in order to better understand the concept which is at the basis of this strategy.

The expiration I will chose is 5 minutes and so I will need a graph set at 5 minutes.

I trace out Fibonacci retracements, in this case from the minimum to the maximum point of the graph in order to display the levels of the retracements (yellow lines).

Here is the graph with 5 minutes TF.

How you can see enlarging the image, I will detect my entrance point (in this case a call) when the candle will reach exactly the level of 61.8. With the white arrow I pointed out my entrance into the market. However, before opening my position I checked that this level was valid also for other greater time frames, such as 15 and 30 minutes.

I’d like to specify that, as I always do when I watch a graph, I’m moving among several time frames in order to understand if the one I see in a particular time frame can correspond with a different time frame and so give me more safety.

Enlarging the two images with 15 and 30 minutes TFs, you can see how the level of Fibonacci 61.8 has been honoured several times also in the past, evidence of the fact that it’s really an excellent level to be considered.

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Summary of the strategy

1. First of all we should make sure we aren’t in the presence of an important macroeconomic datum disclosure. To do this simply have a look at the economic calendar.

2. We choose an asset in which we can observe outlined mini-trends, such as the one shown in the images above.

3. Let’s trace out Fibonacci as shown. Being the trend upward, we will trace it out from the bottom to the top.

4. Check if we are approaching the level 61.8 (coming from the top) in 5, 15 and 30 minutes time frames.

5. We expect a rebound on the level, so we will open a call with 5 minutes expiration when the price level will reach the retracement 61.8.

This is the result of our investment:

This is the closed transaction:

We are always speaking of a strategy, that as always originates high risk investments. If you decide to follow our indications, you will make it at your peril. So, first of all you should try this strategy on a demo account in order to verify its effectiveness, aware of the fact that even if it recurs one time, it isn’t implicit that it will always happen. From our tests it proved to be a successful strategy, so we decided to describe it.

Trading Binaries with the Fibonacci Tool

A Sure-fire Way of Trading Binaries with the Fibonacci Tool

In my experience dealing with retail traders, I have come to discover that the Fibonacci retracement tool is one of those lesser used technical indicators in market analysis. Mention the MACD or moving average indicators and traders will immediately brighten up with recognition. But talk about Fibonacci and everyone just draws blank.

Retracements are a normal part of trading. They occur all the time and a trader needs to know how to use retracements to his advantage. This is what the Fibonacci retracement tool does for you. The tool plots five horizontal lines on the charts which correspond to 5 possible areas to which prices may retrace, with the distances expressed in terms of percentage of the original move:

Prices can retrace to any of these points. So how would you use the retracement tool to trade binary options?

If I were to trade binary options using retracement, this is what I would do:

1) I would select a strongly trending financial instrument, such as gold, EURJPY, GBPJPY or EURUSD.

2) I would select a time frame that will confirm that what is playing out in the market is actually a retracement and not something else. I would therefore choose the Daily chart.

3) I would purchase a “Touch” option in the Touch/No Touch trade type as my preferred trading option, picking a point between current prices and the 23.6% retracement point.

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Trade Technique

Take a look at the Daily chart for the EURUSD. Note that by selecting this chart, I have already fulfilled my first two trade conditions. It is a daily chart, showing me when a retracement is actually occurring, and the EURUSD trends well, being the most actively traded currency pair in the market.

I am now looking for how to fulfil my third condition, which is actually my trade objective. I want to pick a strike price at a point along the course of the price retracement, between the market price and the 23.6% Fibo level. To do this successfully, I must be sure that a retracement is actually in progress. How do I confirm this?

Look at the area where a blue arrow points to “drag Fibo tool here” on the left side of the chart. The bullish momentum of the EURUSD has actually been checkmated by the formation of a reversal candlestick pattern, a bearish harami. An expanded version of that point is shown below:

Occurring at the peak of a bullish momentum is a clear reversal signal. The retracement followed soon after, and went all the way to the 50% retracement point.

Trading binary options is not rocket science. It just takes a trader knowing what to do and when to do it. But it also requires that the trader must be quite knowledgeable about topics such as candlesticks, chart patterns, etc. A trader has to be thoroughly at home with the candlestick patterns. If there is any topic in the financial markets that deserves attention, this is it. With candlesticks, you can determine price direction easily, and then add other tools to increase the success rate of your trade calls.

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.

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