As we said in the previous lesson, simple moving averages can be distorted by spikes. We’ll start with an example. Let’s say we plot a 5-period SMA on the daily chart of EUR/USD. The closing prices for the last 5 days are as follows: Day 1: 1.3172 Day 2: 1.3231 Day 3: 1.3164 Day 4:…
A simple moving average (SMA) is the simplest type of moving average. Basically, a simple moving average is calculated by adding up the last “X” period’s closing prices and then dividing that number by X. Confused??? Don’t worry, we’ll make it crystal clear. Calculating the Simple Moving Average (SMA) If you plotted a 5 period simple moving…
Moving averages are one most commonly used technical indicators. A moving average is simply a way to smooth out price fluctuations to help you distinguish between typical market “noise” and the actual trend direction. By “moving average”, we mean that you are taking the average closing price of a currency pair for the last ‘X’ number of periods. On a…
Let’s review what we’ve learned about trading Fibonacci. The key Fibonacci retracement levels to keep an eye on are: 23.6%, 38.2%, 50.0%, 61.8%, and 76.4%. The levels that seem to hold the most weight are the 38.2%, 50.0%, and 61.8% levels, which are normally set as the default settings of most forex charting software. Remember that forex traders view…
Probably just as important as knowing where to enter or take off profits is knowing where to place your stop loss. You can’t just enter a trade based on Fib levels without having a clue where to exit. Your account will just go up in flames and you will forever blame Fibonacci, cursing his name in…
The next use of Fibonacci will be using them to find “take profit” targets. Gotta always keep in mind “Zombieland Rules of Survival #22”: When in doubt, know your way out! Let’s start with an example of an uptrend. In an uptrend, the general idea is to take profits on a long trade at…
If you’ve been paying attention in class, you’d know by now that you can combine the Fibonacci retracement tool with support and resistance levels, and trend lines to create a simple but super awesome trading strategy. But we ain’t done yet! In this lesson, we’re going to teach you how to combine the Fibonacci retracement tool with your…
Another good tool to combine with the Fibonacci retracement tool is trend line analysis. After all, Fibonacci retracement levels work best when the market is trending, so this makes a lot of sense! Remember that whenever a pair is in a downtrend or uptrend, traders use Fibonacci retracement levels as a way to get in on…
Like we said in the previous lesson, using Fibonacci levels can be very subjective. However, there are ways that you can help tilt the odds in your favor. While the Fibonacci retracement tool is extremely useful, it shouldn’t be used all by its lonesome self. It’s kinda like comparing it to NBA legend Kobe Bryant. Kobe was…
Back in Grade 1, we said that support and resistance levels eventually break. Well, seeing as how Fibonacci levels are used to find support and resistance levels, this also applies to Fibonacci! Fibonacci retracements do NOT always work! They are not foolproof. Let’s go through an example when the Fibonacci retracement tool fails. Below is a…