Learn Fibonacci

We will often use Fibonacci ratios in our trading, so should you learn Fibonacci and loved it. Fibonacci is a very broad subject and there is so much to be learned from Fibonacci with weird names, but we will only study the two, there are: retracement and extension.

First let us know the Fibonacci maker: Leonard Fibonacci. Leonard Fibonacci was an Italian mathematician. He found a simple series of numbers that make up the ratio describing the natural proportions of a thing in this world.

Determine Take Profit & Stop Loss (Support and Resistance)

There are 3 Main Points to consider

1. Let the chart/graphic that shows us where we should place the stop loss

Optimal Stop loss should be placed under the support (in long position) or above the resistance (in the short position).

The most important thing when we are trading is realized when we should exit from market when our position as opposed to the actual market direction, it mean we have to stay put a stop loss and change it when the market friendly to us. The best place to put the stop loss is above resistance or below support, and change to levels that may form later.

Determination of support or resistance can be performed after measuring the range of price movement and taken an extreme high level (Resistance) or extreme low level (Support) on the chart.

How Do We Know Support or Resistance is truly Break-Out?

There is no absolute answer to that question. There are some arguments that say that the level of support or resistance break-out when the closing price has passed that level. But in reality not always so. Let's look at an example below and see what happens when the price closed through the resistance level 2500. 

In this case, the price had closed twice above resistance level 2500 but they always end with prices that falling back below the resistance level. If you really believe in what you see and say that this is an actual breakout, and then take action to buy, then you will feel very sad. Let's look at the chart now, you can see and make a conclusion that the actual resistance level has not really break-out, and the level is now even stronger than before.

Method to Determine Support and Resistance Point

After explain an understanding of what is supports and resistance in last post before, in this post will explained how the basic method to determine support and resistance.

common methods used in determining the level of support and resistance are Simple Visual Method and Trading Range Method.

Simple visual method in determining support and resistance levels are method that relatively easy to implement. To establish support visually is simply draw a line or area of the previous candlestick. To determine support visually, the support line set at the points where reversal is occur on the candlestick.

Simple visual method

Trading Range Method (making the trading range, or band method) can provide an important role in determining the position of support and resistance. In this method of support or resistance can serve as a critical point which can serve as turning point or continuous pattern.

Support and Resistance Location

Location of Support

Usually the range or line of support established under a running price (the price that happen at this time). Traders generally dont take a position when prices are near the support line or with the support range, because the tendency of price movement has a higher uncertainty.

Location of Resistance

The range of resistance is usually located above the running price (the price that happen at this time). Same with support, generally in this range traders and investors tend to hold themselves to take positions becuase the increase level of uncertainty. And besides that, same, as support, in determining the range of resitance, analysts, traders or investors prefer a resistance zone.