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Trading with the Fibonacci Fan: A Profitable Approach for Binary Options

Upon closer examination of objects, processes, and events, it becomes evident that our world is not as haphazard as it may initially appear. Many facets of our lives adhere to discernible patterns, making it possible to comprehend specific processes by identifying the patterns they follow.

One of the most renowned patterns was formulated by the 12th-13th-century Italian mathematician, Leonardo Fibonacci. Remarkably, the Fibonacci sequence and its associated “golden ratio” of 0.618 have found application in diverse modern processes, including but not limited to the realms of painting, architecture, and engineering.

Unsurprisingly, Fibonacci quickly found its place within the financial markets. Based on the pattern deduced by the esteemed Italian mathematician, a range of tools for market analysis were developed, among which the Fibonacci Fan stands out. In this article, we will explore the Fibonacci Fan and its significance in financial analysis.

The Optimal Tool for Binary Options Trading

When you incorporate the Fibonacci Fan onto your trading chart, it furnishes you with a series of critical levels and  points at which price movements will respond. Moreover, the market’s strong adherence to these levels can be attributed more to market participants’ widespread adoption of this tool and their shared reliance on these same key levels. This convergence of market behavior and levels is the very reason they are often referred to as psychological levels.

How to Add the Fibonacci Fan to Your Trading Workspace

It’s worth noting that the Fibonacci Fan isn’t readily available in many trading platforms. However, it’s conveniently accessible on the Olymp Trade website.

Visually, this tool resembles a fan composed of three distinct levels: 38.2, 50, and 61.8. The significance of these levels is noteworthy – 61.8 is a multiple of the “golden ratio” multiplied by 100, 38.2 is derived from the difference between 100 and 61.8, and 50 stands as the universally recognized midpoint.

Surprisingly, it’s these specific levels from which price movements most frequently initiate. Nevertheless, it’s important to acknowledge that the psychological element plays a significant role in this phenomenon.

Incorporating this tool into your workspace is relatively straightforward. Adjacent to the fan, there’s a line featuring three dots. The central dot is used for repositioning the tool, while the two outer dots serve the purpose of customization.

In an uptrend, you’d place the lower point at the base of the trend, and the upper point at the commencement of its corrective phase. Conversely, in a downtrend, you’d reverse this setup, positioning the upper point at the downtrend’s origin and the lower point at its corrective phase initiation.

How to Trade with the Fibonacci Fan

Now, let’s get to the crux of the matter: how to leverage the Fibonacci Fan for profitable binary options trading. The process is, in fact, quite straightforward. It’s often observed that a corrective wave concludes at one of the Fibonacci Fan levels. Consequently, a trade is initiated upon a robust price rebound, indicated by the next candle’s movement aligning with the rebound direction.

In the illustration below, you can see a market scenario where it rebounded from the 50 level and resumed its ongoing upward trend. This exemplifies the practical application of the Fibonacci Fan for making informed trading decisions.

Nonetheless, there are instances when the price breaches the 61.8 level. It often signal a potential reversal in the prevailing trend. In these situations, it is advisable to exercise patience and wait for the emergence of a new trend, at which point you can construct a downward-facing fan, as illustrated in the figure below.

Conversely, there are scenarios where the price surpasses the 61.8 threshold and subsequently retraces, revising the prior high or low, contingent on the prevailing trend. In such instances, the point on the Fibonacci Fan, positioned on the right, should be shifted to the next extreme, facilitating further trading based on rebounds from the levels that align with the current trend.

In conclusion, the Fibonacci Fan stands as a valuable tool for anticipating the conclusion of a corrective phase and establishing pending orders. It is advisable, however, to complement its use with one of the indicators that can validate the price rebounds. The strategic combination of indicators enhances the precision and reliability of your trading decisions.

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