Among the many tools that technical traders utilize, none is more prized than Fibonacci retracements and extensions. By now, I’m sure that most traders are at least vaguely familiar with the origin of the Fibonacci sequence. If not, here is the quick version; mathematician Leonardo Fibonacci identified the sequence in the 13th century. He was actually trying to calculate how many rabbits he could breed when he discovered this sequence of numbers. Nonetheless, the Fibonacci sequence has become the basis for many applications in our society. Today we will be discussing how the Fibonacci sequence is utilized in various aspects of trading.

This sequence isn’t nearly as important as the mathematical relationship between the numbers in the sequence. The Fibonacci retracement numbers used in trading are derived by dividing the prior number in the sequence by the next number. For example: 61.8% is a very important number in the Fibonacci sequence for traders, 55/89 = 0. 6179 and hence you arrive at the Fibonacci retracement number of 61.8. There are other important Fibonacci retracement numbers and they are 38.2%, 50%, and 61.8%. These are the most common numbers used by traders.

Generally speaking, traders will draw a line from peak to trough, or trough to peak, depending on whether the market is moving up or down. They will then calculate where 38.2%, 50%, and 61.8% fall on that line drawn. These days though, nearly every charting program automatically calculates these Fibonacci retracement levels and inserts them for the trader.

There is no sound theoretical backdrop for why these numbers are so important in trading. Some traders feel that the Fibonacci retracement numbers are natural stopping points for price movement based upon trader emotion, while others believe that because of the widespread use of Fibonacci retracements the market responds as a self-fulfilling prophecy. In my trading days I have listened to countless arguments as to the legitimacy of the Fibonacci retracements system. There can be no doubt that the market, more often than not, tends to respect these lines. Of course, the reason they respect these lines is not entirely clear.

But does it really matter?

In my trading, I do not concern myself with the “whys” of Fibonacci retracements as it is unimportant to me. The facts are simple; the market typically pays close attention to these lines and therefore I pay close attention to the lines. In essence, it is a chicken and egg argument. I don’t care if the chicken came first, or the egg came first, I know that these lines are of importance and I regularly chart them.

The lines formed by the Fibonacci retracements are generally referred to as support and resistance. Support refers to the levels to the downside that the market moves, and resistance is the point where the price stops when moving upward.

Does the market always respect Fibonacci retracement price levels?

Unfortunately, the answer to this question is no. This is one of the confounding aspects of Fibonacci trading. While the market often, even usually, respects the price levels of the sequence, there are times when the market blasts through the support and resistance line as if they were not even there. So often times the trader is forced to decide whether the market is actually trading through the resistance levels or going to honor the resistance levels. It can be a tough call, at times. By and large though, the market pauses (at the very least) at the Fibonacci levels.

In summary, we have looked at the way the Fibonacci sequence was discovered in learn how to calculate the Fibonacci retracement levels. Generally speaking, these levels represent support and resistance when they are drawn from peak to trough, or trough to peak. It is unclear exactly why Fibonacci retracements function as they do, but they function with enough frequency that they draw the attention of most traders, especially technical traders.

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I have experienced that people after losing the money in trade used to enter the intraday or jobbing segment. Jobbing is the other name of the intraday trade. In earlier articles I have already explained what is intraday trade? And what are the types of intraday trade? Now the most important question I need to answer is when to do intraday trade?

We all will agree that all days are not trading days, why?  A day in which the trend is not clearly understood is considered as a bad day for the traders. 2nd case when the extreme volatility makes the market to oscillate between the negative and positive trading band. 3rd case when price oscillate between a small trading bands keeping very less opportunity for the speculators. In all these three cases it is difficult to trade and difficult to recognize that whether to do a trade or not.

 I have devised a truly mathematical method which will make you inform whether to do an intraday trade or not on particular day. Though the complete procedure involve in this mathematical modeling I will not revel to you because of my commercial compulsion but I will provide you few simple to use methods.

1. If the gap up or gap down opening happens at 0.618% or 1.272% Fibonacci retracement levels  of the previous days high low range then it is a trading day and the current trend will remain continue for the  day and confidently do the day trade.
2. If the flat opening followed with resistance or support at 0.382 % retracement of the previous days high or low then maximum possibility the trend will give a ‘U’ turn. In this case wait for 50% retracement level of the previous days to break to decide upon a trade.
3. If the current price is above or below the 90 degree resistance or support Gann line drawn from the low or high of the previous day then it is a good day to initiate day trade in the current direction of the trend.
4. If current price is above or below the 30 degree support or resistance Gann line drawn from the previous days high and low then wait for the break out above 90 degree to initiate intraday trade.
5. If the technical intraday chart give the view of a pennant, rectangle then do not day trade on this day.
6. If the last intraday five minuet candle length is less than  50 %  as compared with the last recorded 15 minuet  candle line length then don’t do the day trade till 5 minuet candle has not broken the last 15 minuet candles high or low.  

 These are the most important aspect one intraday trader must look into. Besides that to plan an intraday trade is also a very difficult task. The planning of a intraday trade involves many key aspects out of which the traders objective is most important. It is quite general all traders have the general objective to make profit but the quantum of profit expectation is vital according to my view. 

 In Intraday trade since the earning comes only throught speculation it is always advisable to deploy minimum % of your trading capital maximum up to 30% in a single trade. The 2nd point is being a swing trader. If you happen to be a swing trader and follow the above six steps as mentioned above I am sure you will be a winner in this stock market.  The last advice I can give to all the traders is invest in your education. I have seen and experiences in my 9 years of career in educating the traders. Those who have taken the lesson from their 1st mistake in trading and invested in their self education by attending various seminar programs, buying good literatures are the most successful traders of the contemporary time.

If you think rationally learning activity to educate yourself will not cost you more than 10% of your losses, which you may incur by jump in to the trade without proper knowledge. Do not think I am telling this to promote own products. My core consciousness says this is the truth you may accept it today or accept it in future. I always ask few things to build up the confidence level of the broken down traders. Why you are failure? Many say I was new to this market that’s why. Many say I made the mistake.  Many say I lured by the brokers and friends. Most people say I lack the knowledge.  My friends it is the high time we all must accept this truth and start up the slogan”1st Educate yourself then earn”.

my education : 1.graduate in Mathematics 2.Post Graduate in Computer Aplication(MCA) 3.NCFM,AMFI

My recent Pubilications 1.Gann’s Method 2.Fibonacci Technique 3.Master’s Key to Future and Options 4.Technical Analysis three voluemes

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