Trade Bitcoin Trading

Drawing Fibonacci Retracement Areas on Upward Bitcoin Trend & Down-wards Bitcoin Trend

The price of Bitcoin Crypto Currency doesn't move up/down in a straight line. Instead price of Bitcoin moves up or down in a zigzag manner. Fibonacci Retracement is the trading tool used to calculate/estimate where the zigzag will stop. The pull-back levels are 38.2 %, 50 % and 61.8%. These points form the levels at which the market is likely to make a retracement.

What is retracement? A retracement is a pull-back of the price before the market resumes the original trend/initial direction of movement.

Example of Zigzag Movement: The Example below illustrates price heading up in a zigzag manner.

The diagram below shows this movement in an upwards trending market.

How to Draw Fibonacci Retracement on Upward Bitcoin Trend & Down-wards Bitcoin Trend

1-2: Price moves up 2-3: Price Pullback 3-4: Price Moves up 4-5: Price Pullback 5-6: Price Moves up

Since we can spot where a pull-back starts on a Bitcoin price chart, how do we know where these pullbacks will reach?

The answer is we use Fibonacci retracement areas

This is a type of line study used in BTCUSD trading to predict & calculate the market price retracement zones. This Fibonacci retracement indicator is placed directly on the Bitcoin price chart within the MT5 platform software provided by your online broker, This Fibonacci retracement levels indicator will then automatically calculate these price pull-back zones on the BTC/USD Crypto Currency chart.

What are the Fibo Retracement Levels? 23.6 % Fib retracement level38.2% Fib retracement level50.0 % Fib retracement level61.8% Fib retracement level

38.2 % & 50.0 % Retracement Areas are the most often used and most times this is where the price pull-back will reach - with 38.2 % Fib retracement level being the most popular/liked & the most widely used.

61.8% Fib retracement level also is commonly used to set stop loss orders for trades opened using this strategy - because price retracement won't get to this retracement level most of the time.

This Fibonacci retracement zones tool will be drawn in direction of the Bitcoin price trend as is explained in the examples below.

How to Draw Fibonacci Retracement Areas on an Upward Market Trend

In the diagram below the Bitcoin price is heading up between 1 and 2 then after 2 it retraces down to 50.00% Fib retracement level retracement level then it continues moving up in the original upwards trend. Notice that this trading indicator is drawn from point 1 to 2 in the direction of the Bitcoin price trend (Upwards trend).

Because we know this is just a retracement/pullback based on our experience using this indicator - Fib retracement level, we put a buy order just between the levels 38.2% & 50.00 % retracement levels and our stop loss just below 61.80 % retracement level. If you had put a buy at this point in the trade example below you would have made a lot of profit as shown below.

Drawing Fibo Retracement on Upward Bitcoin Trend & Down-wards Bitcoin Trend

Fib Retracement Levels Drawn on an Upward Bitcoin Price Trend

Explanation for the Above Fibonacci Retracement Setup Trade Example

Once the Bitcoin price hit the 50.0 percent Fib retracement level, this zone provided a lot of support for the market price, and afterwards the market then resumed the original upwards trend and continued to move up.

23.6 % Fib retracement level provides minimum support and is not an ideal place to place an order.

38.2 % Fibonacci retracement zone provides some support but the price in this example continued to retrace upto the 50 % retracement level. Most of the times traders will place their buy limit orders at this level - 38.2 % Fib retracement level.

50.0 % Fib retracement level provides a lot of support & in this example, this was the ideal place which to place a buy order.

For this example, the price retracement reached the 50.0 % retracement level, but most of the time the market will retrace up to 38.2 % & hence most of the time Bitcoin traders will set their buy limit orders at the 38.2 % Fib retracement level, while at the same time placing their stop loss just below 61.8 % Fib retracement level.

How to Draw Fibonacci Retracement Areas on a Downward Market Trend

In the diagram below the market is moving down between 1 and 2, then after 2 it retraces up to 38.2% Fib retracement level & then it continues heading down in the original downwards trend. Notice that this Fibonacci retracement indicator is plotted from point 1 to point 2 in direction of the Bitcoin price trend (Downwards trend).

Because we know this is just a pull-back we put a sell order at 38.2% Fib retracement level & a stoploss order just above 61.80 % Fib retracement level.

If you had put a sell order at the 38.2 % Fib retracement level as shown on the trade below you would have made a lot of profit afterwards. In this trade the retracement reached 38.2% Fib retracement level & didn't get to 50.00% Fib retracement level. From experience it is always good to use 38.2% Fib retracement level when trading BTCUSD cryptocurrency because most times the pull-back doesn't always get to 50.00 % retracement mark.

Fibonacci Drawing on Bitcoin Charts Exercises - How Do I Draw Fibonacci Retracement on Upward BTCUSD Trend & Down-wards BTCUSD Trend?

Fib Retracement Levels Drawn on a Downward Bitcoin Price Trend

Explanation for the Above Fibonacci Retracement Setup Trade Example

The above example is the perfect setup where the price retraces immediately after touching the 38.2 % Fib retracement level.

This Fibonacci retracement zone provided a lot of resistance for the market price pull-back: this was the best place for a BTC/USD Crypto trader to place a sell limit order as the market quickly headed down after hitting this 38.2 % Fib retracement level. For this trade a trader would have put their stop loss order at the 61.8 % Fib retracement level.

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