Алексей Боровков – Fibonacci in trading: the mathematics of market movement. A practical guide to using Correction, Expansion, and Fan Lines in the Forex Market (страница 7)
From MINIMUM (0%) to MAXIMUM (100%)
1. Activate the "Fibonacci Retracement Levels" tool.
2. Click on the MINIMUM point (the beginning of the impulse, the base).
3. Drag the cursor UP to the MAXIMUM point (the end of the impulse, the top).
4. Result: The levels of 38.2%, 50%, and 61.8% will appear BELOW the maximum, which are your future support zones for a pullback.
Visualization: [ Low (0%) ] ===== UP IMPULSE =====> [ High (100%) ]
Support levels:23.6% – 38.2% – 50% – 61.8% – 78.6% (between High and Low)
FOR A DOWN TREND:
From MAXIMUM (0%) to MINIMUM (100%)
1. Activate the "Fibonacci Retracement Levels" tool.
2. Click on the MAXIMUM point (the beginning of the impulse, the top).
3. Drag the cursor DOWN to the MINIMUM point (the end of the impulse, the base).
4. Result: The levels of 38.2%, 50%, and 61.8% will appear above the low, which are your future resistance zones for a pullback (upward rebound).
Visualization: [ High (0%) ] ===== IMPULSE DOWN =====> [ Low (100%) ]
Resistance levels:23.6% – 38.2% – 50% – 61.8% – 78.6% (between Low and High)
TYPICAL MISTAKES OF NEWCOMERS AND WHY THEY ARE WRONG
MISTAKE 1: In reverse (against the trend).
· What they do: In an upward trend, they pull the grid from the high to the low.
· Result: The 38.2% and 61.8% levels are higher than the current price in a growing market, which is pointless for finding a pullback. This measures the distance already traveled, not the future pullback.
ERROR 2: On the entire chart.
· What they do: They stretch the grid from the historical low to the historical high over several years.
· Why it's an error: These global levels are too broad and static. They do not reflect the structure of the current, local trend that you intend to trade.
ERROR 3: On the side (flat).
· What they do: They try to stretch the grid on a horizontal, non-trending movement.
· Why it's an error: Fibonacci is a trend tool. Without a clear impulse (strong movement), there is no concept of "correction." The levels will be random and ineffective.
ERROR 4: By candle bodies instead of shadows (wick).
· What they do: They build from the minimum/maximum of candle bodies (open/close), ignoring the true extremes (high/low).
· Why it's an error: The market reacts to the absolute extremes where stop orders are placed. Candle shadows are crucial for accurate construction.
RULE FOR MEMORIZATION (MNEMONIC)
"Pull the grid along the trend to catch a REBOUND against it."
I WANT TO BUY ON A REBOUND → I'm looking for an upward trend → I'm pulling the grid from below → I'm waiting for a drop to support levels (38.2-61.8%).
I WANT TO SELL ON A REBOUND → I'm looking for a downward trend → I'm pulling the grid DOWN → I'm waiting for the price to rise to the resistance levels (38.2-61.8%).
The key principle of market psychology
The correct setup works because it reflects the pattern of crowd behavior:
1. There is a strong movement (emotions: greed, FOMO).
2. Some traders take profit → a retracement begins.
3. The other part, which missed the movement, is waiting for a "price drop to enter" the trend.
4. These entry points are actively sought out at key Fibonacci levels, where buyers and sellers meet, creating a new momentum.
Practical task:
1. Open the EUR/USD chart on H4.
2. Find the last clear upward impulse (at least 5-8 candles upward).
3. Properly overlay the Fibonacci grid from the minimum to the maximum of this impulse.
4. Enable the display of the 78.6% level (often hidden by default).
5. Scroll the chart to the right and mark at which Fibo level (23.6, 38.2, 50, 61.8 or 78.6) the price stopped its rollback for the first time and turned around (at least for 1-2 candles). You will see a practical confirmation of the method.
In the next section, we will discuss in detail what a Fibonacci consolidation zone is and how to trade a rebound from a level with confirmation.
• Key levels: 38.2%, 50.0%, 61.8%, and 78.6%
After the correct construction of the grid, a set of horizontal lines appears in front of you. It is important to understand that not all levels are equal. Each has its own mathematical nature, psychological significance, and frequency of "execution" by the market. Let's analyze them as the depth of the correction increases.
1. Level 38.2% – Strong Trend Level
· Origin: 1 – 0.618 = 0.382 or square of 0.618.
· Meaning: A shallow, "healthy" correction. In fact, the market is only taking a short break.
· Psychology: It shows that the trend movement was so powerful that most participants do not want to miss the opportunity to enter, and the pullback is quickly bought/sold.
· How to trade:
· Enter a trend trade at the first reversal signal (for example, a pin bar) at this level.
· The stop loss is usually placed slightly below (for buying) 50.0%.
· Feature: Frequent false breakouts. The price may slightly penetrate the level and immediately return.
2. Level 50.0% – Balance and Psychology Level
· Important: This is NOT a Fibonacci number, but it is perhaps the most respected correction level by the market.
· What it means: Exactly half of the movement. The point of perfect balance between bulls and bears.
· Psychology: A deep correction, but still within the framework of trend logic. Many institutional traders and algorithms use this level for entry.
· How to trade:
· An extremely reliable entry zone. Signals here are often of high quality.
· Requires the same confirmation as other levels.
· A breakout of 50% often leads to a test of 61.8%.
3. Level 61.8% – "Golden" Correction (Main Level)
· Origin: 1 / 1.618 = 0.618. The inverse value of the "golden ratio".