For professional traders in Binary Options, a Fibonacci indicator is a powerful tool in predicting price reversal points. Today’s article will give you everything around this indicator. How to use it in trading with the highest efficiency.
A detailed video on how to use the Fibonacci indicator
What is a Fibonacci indicator?
A Fibonacci indicator is a technical analysis indicator. It is based on the nature of the Fibonacci sequence to identify special price zones of the market.
Fibonacci is a sequence of natural numbers arranged from left to right with a specified property. After the first 2 numbers, the 3rd numeric value in the sequence is the sum of the 2 consecutive numbers ahead. For example,
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, and next digits are 610, etc.
Morphologically, on price charts, Fibonacci is a series of horizontal lines that correspond to price levels such as Resistance or Support. This indicator helps traders to identify special price zones, thereby making predictions about the market in the medium and long term.
Common usage of the Fibonacci indicator
Traders always use Fibonacci two main uses:
To identify price reversal levels (Resistance/Support)
This is the basic use of Fibonacci in trading. You just need to put Fibonacci on the top and bottom of a market segment. Then, the resistance and support levels of the price will appear.
To determine price trends
Fibonacci also helps traders determine if the price is in a trend or not. The signal here is that the price creates troughs and peaks at special price zones that Fibonacci displays.
Trade Binary Options effectively with the Fibonacci indicator
There are 2 most successful strategies to trade BO using the Fibonacci indicator.
Basically, we are going to use Fibonacci to determine a trend. And then, we will look for entry points with another reliable price signal.
Strategy 1: Fibonacci combines with reversal candlestick patterns
The reversal candlestick patterns appearing at levels will be ideal signals for you to open a safe order.
Conditions: A 5-minute Japanese candlestick chart. The Fibonacci indicator. The expiration time is 15 minutes.
How to open an order
+ Open an UP order when the price is in an uptrend and bullish reversal candlestick patterns appear (Bullish Harami, Bullish Engulfing, etc.) at the Fibonacci support zone.
+ Open a DOWN order when the price is in a downtrend and bearish reversal candlestick patterns appear (Bearish Harami, Evening Star, Bearish Engulfing, etc.) at the Fibonacci resistance zone.
Strategy 2: Fibonacci combines with SMA30
This is a strategy to combine 2 trend identification indicators to increase entry reliability. Specifically, we will look for entry points when the price reacts to the SMA30.
Conditions: A 5-minute Japanese candlestick chart. The Fibonacci indicator, the SMA30. Open orders with an expiration time of 15 minutes.
How to open an order
+ Open an UP order when the price creates a green candlestick penetrating the SMA30 from below at the support created by Fibonacci.
+ Open a DOWN order when the price creates a red candlestick penetrating the SMA30 from above at the resistance created by Fibonacci.
This is a tutorial on how to use Fibonacci indicators effectively in Binary Options trading by How to trade blog. Please leave all questions as well as your sharing. Best regards!