How to Trade Retracement on Downward Forex Trend - Forex Retracement Trading for Downward Trend
How Do You Draw Fibonacci Retracement for Forex Downtrend?
The fibonacci retracement indicator is placed on a forex chart in an downward forex trending market and this Fibonacci Retracement indicator then calculates the retracement levels for the downward trend on the forex charts. Fibonacci retracement levels indicator is used by many traders as a forex retracement trading technical indicator.
In the Forex Retracement Strategy example below the forex market is heading downwards between chart point 1 and chart point 2, then after chart point 2 the forex price then retraces up to 38.2% retracement level then it continues heading downwards in the original downwards trend. Note that this Fibonacci retracement indicator is drawn from point 1 to point 2 in direction of the Forex trend (Downwards Direction).
Because we know this is just a retracement based on the forex chart trend we put a sell order at 38.2% Fibonacci retracement level and a stop loss just above 61.8% Fibonacci retracement level.
If you had put a sell order at the 38.2% Fibonacci retracement level as shown on the forex trade below you would have made a lot of pips afterwards after the price reached the 38.2% Fibonacci retracement level and then resumed the downward forex trend.
In this trade the retracement of price reached 38.2% Fibo retracement level and did not get to 50.00% Fibo retracement level. It is always good to use 38.20% Fibonacci retracement level because most times the price retracement does not always get to 50.00% Fibo retracement level.
How to Trade Price Retracement on Downward Forex Trend - Fibonacci Retracement Areas on Chart
Explanation for the Above FX Trading Fibonacci Retracement Strategy Example
The above Fibonacci Retracement Strategy examples is a forex retracement trading set up where the price retraces immediately after touching the 38.20% Fibonacci Retracement Level.
This Fibonacci Retracement level provided a lot of resistance for the price retracement, this was the best place for a trader to set a sell limit pending order as a forex market quickly moved down after hitting this 38.2% Fibonacci retracement level.
