fibonacci retracement trading strategy basics / fib levels introduction tutorial for beginners explained, fibonacci trading secrets techniques for dummies, fibonacci levels retracement extension 101 day trading, fib trading strategy david moadel welcome to looking at the markets with david modell today i'm going to give you a very basic introduction to fibonacci retracement now what is first of all
apple share price gbp, fibonacci numbers were invented a long time ago and they're numbers that are considered very special both in nature and in life and they can be very useful
for determining whether a reversal okay a stock does not just go up in a straight line it's like a zigzag okay and so you know i might go up for a while and then retrace or go back in the opposite direction a little bit and then go up a lot and then retrace a little bit and then go up a lot so it's like a lightning bolt pattern or a zigzag stair
stair steps whatever you might want to call it so you have these little retracements in there and you want to know with every little retracement is it just a minor bump in the road or is it a real turn around okay yeah because let's say you're you know you're long you've bought a stock okay it's going up but then it has these
little these little retracements you want to know should i take profits or is it likely to run is it likely to you know keep going up after the little bump in the road all right and then same with shorting a stock if you're shorting a stock it's going down it's going to have retracement it's going to come up a little bit then go down then come up a
little bit then go down so you want to know whether those are just little you know little retracements little little stair steps or is it a real reversal is it a real turnaround and is it going to come up and keep going up and you know should you take profits alright so fibonacci numbers can be very useful the
percentage is you want to know r and there are other ones but and we're going to focus on retracement and not extension today all right so we're going to focus on thirty eight point two percent 50 percent and 61.8% there are other levels but these are the most popular ones interestingly enough fifty percent is not an actual fibonacci
number not originally but it's commonly used alright so we're going to focus on these three let's clear it out and okay so first thing you want to do is now you can calculate them with a calculator but why do that nowadays you might as well just use the tools that are online i like to go to google and
type in fibonacci retracement calculator and you get a whole bunch of them and you can pick your favorite one all right today i'm going to use the one from baby pips comm there it is right there on google i just clicked on it and there it is all right baby pips calm it's for forex trading but i've noticed that it's it's
really just calculating numbers for me it doesn't matter whether you use this for forex or stocks or commodities whatever the numbers come out the same just for calculating the you know it's just multiplication basically alright so we're going to use another free tool here this is from stockcharts.com i'm going to use their basic charts okay so
this is pepsi this is the daily chart i'm going to use it as an example and you can see an uptrend here alright so let's say you you noticed that there's a resistance level here you notice that pepsi had an up move but then it could not get above 104 and that was resistance and then it just couldn't get above it and then it went down then
went up to that 104 level couldn't get above it went down and finally came up to it and broke through so i'm going to i'm going to consider this the you know the starting point of the uptrend and you know and and then this is the ending point of the uptrend so far about 114 and notice that it hit 114 or so and then it's starting to
retrace a little bit and you might be wondering if you bought here you might be wondering oh is it is it going to turn around and just keep going down so is this an actual reversal or is it just a little retracement here and is it just a little little stair step it's just going to really turn around and keep going alright and this is not a hundred
percent accurate this fibonacci tool yeah it's not 100% reliable no indicator is on percent reliable so you have to do your own research make your own decisions alright so what i'm going to do is i'm going to consider this the the end of the uptrend is like my zero percent all right this is a starting point of the retracement all right so
i'm going to draw a line here and consider this the zero line oops actually i'm sorry you have to you have to click a note eight first alright you click annotate on stockcharts.com after you make your chart there it is okay now after clicking a note 8 at the bottom of the chart now i can draw my lines all right i'm going to draw a line there we
go and hopefully it'll be accurate let's see there we go you can move the line a little bit and then that's my starting point for the retracement and then the end of the retracement well theoretically it could be the end of this up move here so we're going to say 104 so you might consider the the high point
of the of the up move to be at the beginning of the retracement and if you might consider the beginning of the up move to be the potential end of the retracement that's one way of looking at it alright so i'm going to draw this line move it around a little bit make it a little bit more accurate so 114 - 104 how far is it going to retrace is this a
real turnaround a real you know is it just going to keep going down is it a real reversal or not all right i'm going to plug in 114 and 104 and i'm going to use here it is for the calculator here i'm going to use it in the uptrend column okay because this is a retracement of an uptrend alright if you want to know if a downtrend is going to
retrace and turn around back up and keep going you want to use the downtrend section alright so i'm with the high was 114 the low was 104 calculate alright and let's plot these three fib levels here we'll start with we'll start with the 38.2% that's one ten point eighteen all right here we go one ten point eighteen would be about a
little bit above 110 let's say we'll do it like that a little bit lower than that i think right above 110 there we go okay and we're going to make that a dotted line just because i feel like it all right and then the next one would be 109 that's 50% retracement okay so be right right in the middle there 109 makes sense and there we go try to make
it a little straighter there we go and then so think about it if that means if it turn around and then went down you know 38.2% it would be down to the - to this line if it if it if it retraced 50% will be down to this line let's do the third one 61.8% 107 82 whoops let's do it 107 82 that's almost 108
there we go maybe a little a little lower than that there we go perfect all right so we have our fib levels drawn here or at least those three that i like to use all right so notice that this is not much of a trace of a retracement at all it hasn't even hit that first level here not to mention the second and third ones now the idea here is so far your
you can be perfectly confident that you know this is not a true turnaround it's not just going to keep going down down down of course it always could stock market is unpredictable but so far you can be confident that the uptrend is intact if it hits that first level all right but then turns around and and keeps going
back up then you can continue to be it hits that middle level the 50% then but then bounces off of it then you could be fairly confident that the uptrend is still intact but less confident so you're more confident if it if it goes to here or less it wasn't even close here all right if it goes to that first line or less and then turns
around then you can be very confident that the uptrend is intact if it goes to that second line or less you can be fairly confident but not as much now if it goes below this line then you want to just ah you want to accept that this is a true turnaround and is not very likely to continue the uptrend okay so if it goes down down down below this
line then if you have a long position starting here you may just want to get out and you know take whatever profits even get because now it's very likely to keep going down and now in other words that's a real turnaround here again no guarantees but at this point if it crosses through that down through that line you know the that's that's a true
turnaround it's not just a little stair step or a little retracement there all right now you can go in the other direction as well all right so this is at&t and we see a downtrend here from here to here is it going to keep going notice there's no retracement at all yet okay but there's going to be one at some point you can be pretty confident of
that so let's click on annotate and we're going to draw let's say draw a line at 40 to about 40 to here and another one at around let's say 30 i don't know 3950 and you can make your numbers more exact if you want to i'm just rounding here to keep it simple all right and so you want to know if this downtrend if it's going to start to
retrace all right so really your your zero is here and you're a hundred percent is here let's go ahead and clear that out go back down down trend let's say the high 42 low 39 50 42 39 50 let's calculate that all right we're focusing on the retracement not on the extension today let's plot the first point at let's say the 61 point eight so
we're going to go actually now let let me do it right let's start at the 38.2% retracement which is not much of a retracement and that's forty point four five five okay so forty point four five let's let's say 40 and a half let's go ahead and round a little bit which is right about there maybe a little bit below that line and there we go right
about there i'm going to make it a dotted line all right so that's that's if it if it bounced here if it went up here then that would be a very minor retracement and you could be confident that the downtrend is still intact and so if you had a short position from here you could probably just be confident that that
it's okay and that's just going to keep going down in all probability let's say the next one let's do the fifty percent forty point seventy five that's an easier number for me to to do alright so that's right about there right about right there okay so if it retraces and hits this you can be confident that this is the downtrend is
still intact but less confidence so you got to be more cautious with that and then finally a deeper retracement would be 61.8% that's around 41 point oh four five can we just say 41 i think so 41 and a little bit whoops 41 in a little bit more so 41 and a tiny bit more right about there there we go
actually yeah right right there okay if a retraces and breaks through this line if it goes further than that then according to the fib idea this is a true turn around and if you went short from here you may want to take your profits and just just get out because it really looks like the downtrend is over at that point and it's not just a minor stair
step it's not just a minor retracement all right and so this is a really interesting idea it's based on really ancient numbers that you see in nature that you see in life and can be used for trading i recommend using this with other indicators such as rsi moving averages things like that just to confirm because you want to you know not
just rely on necessarily on one indicator for your entire trading strategy so this was an introduction and by the way there is software that will plot these for you okay i like to do it manually but you know if you could if you can find an app or software that plots it for you the retracement lines that's fine too
all right and it is subject to interpretation as well all right so if you found this to be helpful please give this video a thumbs up on youtube and please like please like and subscribe to my youtube channel and also leave comments i really appreciate that and subscribing gives you updates on when i'm putting out new
videos and so that's a really great thing for you to do also if you have questions or you want to get some help putting together a trading or investing plan you can email me at any time my email address is david modell at gmail.com alright thank you so much for watching and listening and i'll talk to you again soon
