How to Trade Retracement on Downwards Stocks Trend
How Do I Draw Stock Fibonacci Retracement for Stocks Downtrend?
The fibonacci retracement indicator is placed on a stocks chart in an downward stocks trending market and this Stock Fibonacci Retracement indicator then calculates the retracement levels for the downward trend on the stock charts. Fibonacci retracement levels indicator is used by many traders as a stocks retracement trading technical indicator.
In the Stocks Retracement Strategy example illustrated and explained below the stocks market is moving downwards between chart point 1 & chart point 2, then after chart point 2 the stocks price then retraces up to 38.2% retracement level then it continues moving downwards in the original downwards trend. Note that this stocks Fibonacci retracement indicator is drawn from point 1 to point 2 in direction of the trend (Downwards Direction).
Because we know this is just a retracement based on the stock chart stocks 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 stocks 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 stock trend.
In this trade the retracement of stocks price reached 38.20% Fibo retracement level & did not get to 50.0% Fibo retracement level. It is always good to use 38.2% Fibo retracement level because most times the stocks price retracement doesn't always get to 50.0% Fibo retracement level.
How to Trade Stocks Price Retracement on Downward Stocks Trend - Fibonacci Retracement Areas on Stocks Chart
Explanation for the Above Stock Fibonacci Retracement Strategy Example
The above Stock Fibonacci Retracement Strategy example is a stocks retracement trading set up where the price retraces immediately after touching the 38.2% Stock Fibonacci Retracement Level.
This Stock Fibonacci Retracement level provided a lot of resistance for the stocks price retracement, this was the best place for a trader to set a sell limit pending order as a stocks market quickly moved down after hitting this 38.2% Fibonacci retracement level.
