Fibonacci levels are used to determine the potential for a correction, as well as to set goals after its completion. The tool works best when the market is in a trend move.
While an uptrend, the goal is to determine the potential for a correction, and further entry from (HL) into the long position to form (HH). While the downtrend you need to determine the potential for correction, with the formation of (LH), and the search for an entry point to short position.
Identify the trend and work with it
Extend the Fibonacci grid extends from (HL) to (HH) on an uptrend. After breaking of the downtrend from (LL) to (HH).
On a downtrend, the Fibonacci net is stretched from (LH) to (LL). After the breaking of the uptrend from (HH) to (LL).
Be sure to correctly identify the Swing High and Swing Low for correct use of the tool.
0.5 - a fair price.
0.62; 0.705; 0.79 - OTE (optimal trade entry) zone.
This is a modified version of the tool used by Smart Money traders with the highest mathematical expectation of price reversal. To open a position, we are always interested in the price behavior above or below 0.5. To open a short position, we should look at the price above 0.5, which is considered the premium price. To open a long position we look at price behavior below 0.5, which is considered a discount price.
The OTE zone is a modified grid. It's always in the premium zone, to search for a short position, or in the discount zone, to search for a long position. These levels act as an optimal entry point (OTE).
Fibonacci levels alone are not support or resistance levels. Price reverse happens from specific areas such as orderblock, imbalance in discount, premium or OTE zones
