In the trading world, combining the concept of price action with the Fibonacci retracement level of 50% can be a powerful strategy, especially when applied in suitable market conditions. This combination utilizes price movement analysis (price action) along with key Fibonacci retracement level 50% to identify potential trading opportunities.
.png)
Implementation Steps of the Strategy:
1. Price Action Confirmation on the Daily Chart:
If there is a price action signal on the daily chart, especially with chart formations in a retracement or correction phase (both in an uptrend or downtrend), the first step is to draw the Fibonacci retracement level line. Check whether the price action formation occurs near or exactly at the 50% Fibonacci retracement level. It is important to ensure that the price action signal is closely related to this level.
2. Entry Confirmation with Price Action Setup:
After finding a strong correlation between price action and the 50% Fibonacci retracement level, focus on the entry level at the closing of the last bar in the price action formation. For example, for a buy signal, entry can be made after the closing of the last bar (e.g., the third bar), and the stop-loss is placed slightly below the 50% Fibonacci retracement level.
3. Confirmation Evaluation:
If the Fibonacci retracement level does not align or is far from the price action formation, it indicates that the level does not support price action. Fibonacci retracement does not precisely determine Support or Resistance levels, while price action formations always indicate changes in price movement. If there are no other supporting factors confirming the price action formation, the level may be weak or less valid.
- 4. Example Confirmation in Trading:
In the example of AUD/USD daily, there is a pin bar formation at the 50% Fibonacci retracement level, indicating that this level is a support level. A buy entry can be made after the closing of the last bar (the third bar), with the stop-loss placed below the 50% Fibonacci retracement level. As a result, the price moves up after the formation of the price action.
Another example in AUD/JPY daily shows confirmation of the 50% Fibonacci retracement level after the breakthrough. Nevertheless, the price action formation remains valid as a pin bar appears at the 50% level zone, validating the Fibonacci retracement level as a support level.
By combining the strength of the Fibonacci retracement level 50% and price action confirmation, traders can enhance the accuracy of their analysis and trading decisions. However, it is always important to consider the market context and other factors that may affect trading decisions. Always evaluate carefully to ensure the validity of trading signals before taking positions.
.jpg)
.png)
.jpg)
.png)
