By utilizing the “Fibonacci Levels” indicator, traders gain a strategic advantage, enabling them to make informed decisions about when to enter or exit positions with greater confidence. Whether you’re an experienced trader or just starting in the world of financial markets, this indicator offers a valuable resource for assessing market dynamics and enhancing your trading strategy.
In the world of trading, there comes a time when every asset must change its course. The unending procession of trends takes a pause, and traders following those trends must temporarily halt their buying of options.
However, a retracement in the opposite direction doesn’t always signify the termination of the ongoing trend. The market engages in oscillatory movements with various corrections, presenting opportunities for profit.
This is where the widely acclaimed “Fibonacci Levels” indicator comes into play. It not only helps distinguish between a trend reversal and a correction but also precisely signals the conclusion of the latter.
You can access this invaluable tool in the “Indicators” menu of the Olymp Trade broker’s trading terminal.
Description of the Fibonacci Levels
The Fibonacci Levels tool draws its inspiration from the renowned numerical sequence pioneered by the medieval mathematician Leonardo of Pisa, also known as Fibonacci. What makes this sequence extraordinary is that each subsequent number in the sequence is the sum of the two preceding ones. However, what truly adds to the mystique is the discovery of the “Golden Ratio” by this mathematician, a number denoted as 1.618 (or 0.618 on the chart). This mystical ratio leaves its mark not only in mathematics but is also evident in architecture, art, nature, and, as you’ll soon discover, in the world of financial markets.
To activate this tool, follow these steps:
- Access the “Indicators” menu and select the Fibonacci Levels.
- Double-click on either the upper point (if the trend is downward) or the lower point (if the trend is upward) on your chart.
- Adjust the white circle, setting its value to 1 at the extreme point of the current movement, which marks the beginning of a correction or reversal.
Note: It’s recommended NOT to use the tool for trading in sideways or flat market. “Fibonacci levels” works great for volatile markets.
How to use the indicator for trading?
Let us start with an explanation of the value of Golden Ratio for trading. Historical data proves that a deep correction takes place the level of 0.618. Consequently, if the market “tests” this line and subsequently reverses, it presents an opportunity to resume trading along the new trend. It is recommended to purchase a contract during the reversal and Fibonacci serves as a reliable signal.
If the price movement persists, disregarding the 0.618 level, it may indicate a shift in the prevailing trend. In such a scenario, traders focused on the trend should consider refraining from purchasing contracts.
Nonetheless, the utility of this tool extends beyond this point. Following a return to the ongoing trend, typically after bouncing from the 0.618 level, prices frequently encounter rebounds from other levels. These junctures can be harnessed for short-term options purchases, where the expiration period aligns with the formation time of 1-2 candles.
Thus, the “Fibonacci Levels” indicator allows you not only to determine the end of a correction or a trend reversal, but also to give clear signals for buying contracts on the binary options market.
In summary, the “Fibonacci Levels” indicator serves as a versatile tool that not only assists in identifying correction endpoints or trend reversals but also provides clear and actionable signals for purchasing contracts in the binary options market.
Conclusion
In summary, the “Fibonacci Levels” indicator serves as a versatile tool that not only assists in identifying correction endpoints or trend reversals but also provides clear and actionable signals for purchasing contracts in the binary options market.