Download our DEMO Software
Must Read ArticleDay Trading Made EasyMust Read
Day Trade Using Fibonacci Method
Fibonacci Retracement Technique proved to be the best and simple technique for day trading. The Retracement is of two types
a. Growth Retracement :If the price action is rising in nature but in between some correction brings down the price and again escalate to higher levels then we can this Retracement as a growth Retracement. The cause of growth retracement is due to profit booking, short term correction or portfolio churning by Institutions.
b. Decay Retracement: If the price action is in falling in nature but in between some technical bounce back. or relief rally happens due to short covering then we classify this as a decay Retracement. The cause of decay Retracement is a correction, technical bounce back or relief rally.
Retracement again has three trade decisive zones:
Bounce back or Trend Continuation zone:If the price finds support at 50% of retracement of its prior swing of up move or resistance at 50% of retracement of its prior swing of down move then this retracement is called bounce back price zone.
Example: Say nifty has fallen from 4700 to 4500. The prior trend of this 4700 high was a rising trend started from 4000 then it is classified as growth retracement. Taking the 50% retracement of this high low movement of 700 points to 350 I will say if the price finds support at 4350 then uptrend will resume and has high probability of crossing the previous high. Now the next big question is how do I will know that 4350 support is a valid support or is a mathematical eye wash for me. Support must be validated by the volume. By simple observation if I will find the fall below 4350 invites buying and escalates the price to bit higher level then I will conclude this price is a valid support.
Death Zone or trend reversal zone: In retracement principle if the price retraced more then 61.8% of its prior swing then it has remote chance of going back to its prior trend.
Range bound or consolidation zone: if price finds support or resistance at 38.2% retracement or never crossover the 38.2% level from the50% retracement then I can classify the retracement as a consolidation zone.Continue