First off, remember – finding key levels with fibonacci isn’t as easy as using pivot points, but it’s a whole lot more satisfying. Do it right and you’ll see the markets bow down to your aptitude. We start with the simplest – retracements. By the way, if you haven’t yet opened a demo account, at the very least, now’s the time to do so.

First of all, remember what Dow said on waves? That there are 3 – primary, secondary, and minor. Well, we need to find that first impulse or main thrust. Now, I realize this is subjective, but if you find a construction of 3 waves – main, smaller reverse and even smaller resumption , you can’t go wrong. That main impulse is strong and lengthy. Now, click on the fibonacci retracement tool, place the mouse at the beginning of the chart line and stretch it to the top of that impulse. As you can see, the retracements nearly always open near the respective level. Horizontal lines are drawn across the charm each quantifying the retracement and adjournment levels.

Next, the Fibonacci channel. It’s very much like the retracement tool, but generates diagonal lines to describe support and resistance along a rising or falling trend. To use it, you’ll have to first define your baseline by joining two major lows in an uptrend or highs in a downtrend. The next step is to select the high between the 2 lows you selected, or vice versa in a downtrend. The result is a set of Fibonacci levels that indicate future target levels.

Now, because retracements also exist along a timeline, there’s also a version of the Fibonacci level indicator that goes sideways – the time zone generator. Instead of predicting support and resistance levels, though, it tells us when to expect a reversal. It’s not as precise a tool as the retracements, but it’s an excellent confirmation tool. Again, start with the beginning of the main trend and extend until the first period on the extension is parallel to the same period on the map. You should see pattern replications along the lines of the extension

The Fibonacci fan is used to find support and resistance levels along a rising or falling trend. It also introduces the time element into the prediction, expanding as it develops. Trace the fan from the low to the high points at the beginning of a trend. Extension lines will be generated inside that define continuing resistance and support levels for a trend.

Finally, the Fibonacci expansion tool extends into wave theory and we use it to predict the next arm of a wave. Like the channel tool, we’ll be providing 2 inputs. In an uptrend, draw the first line from the bottom of the first movement to the top at its end. Then drag the second line to the bottom of that first retracement. The tool will provide Fibonacci levels for aiming the top of the second main movement of the wave and the bottom of its subsequent retracement. We do the precise opposite in a down-trend.