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Using fibonacci retracements to project price targets

Although there is more than one way to project a price target, it is not uncommon for those projections to provide similar results. In fact, logically, if each of these methods have some statistical validity we should expect them to line up quite often.

Using a fibonacci retracement to project a price target is one of the most convenient ways to develop a good estimate for where prices might go following a breakout because it doesn't require a lot of calculation or measuring.

Here are a few easy steps to creating a price projection with the fibonacci retracement indicator.

  1. Trade with the trend: You will typically get better accuracy projecting bullish targets when the market is in a long term uptrend. Similarly, when the market is in a long term down trend you should be looking for price targets to the downside.
  2. Apply the fibonacci retracement anchor points to the top and bottom of the consolidation pattern that has lead to the breakout you are considering trading.
  3. Your initial estimate for where prices may go can be set at the 161.8% retracement level that will have been extended beyond the first anchor point. Should prices break this initial target the 261.8% retracement level is the secondary target.

 

In the video you will learn more about how to apply the fibonacci retracement tool within the MetaTrader4 charts. You will also learn how to make sure your projections are in line with the prevailing long term trend regardless of what chart time-frame you are trading.

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