How to Use Fibonacci Retracement with Support and Resistance

Babypips Elementary - Grade 3

Why should the Fibonacci retracement tool not be used by itself?

It is subjective and works best when combined with other technical analysis tools to increase the odds of success.

What is one of the best ways to use the Fibonacci retracement tool?

To spot potential support and resistance levels and see if they line up with Fibonacci retracement levels.

Why does combining Fibonacci levels with other support and resistance areas increase the chance of price bouncing?

Because many other traders are also watching these same price areas, potentially leading to a concentration of buy/sell orders there, making it a self-fulfilling prophecy.

What happened during the second test of the combined support/Fib level in the USD/CHF example?

Price tried to pierce through but failed to close below the support level, eventually breaking past the Swing High and resuming its uptrend.

What should traders look for when combining Fibonacci and support/resistance in a downtrend?

Price levels that have been areas of interest in the past (e.g., previous support turned resistance) that line up with Fibonacci resistance levels to consider selling.

What are the two main reasons that price is more likely to bounce from combined support/resistance and Fibonacci levels?

1. Previous support/resistance levels are eyed by many traders. 2. Many traders also use the Fibonacci retracement tool and will look to jump in on those Fib levels.

What is the ultimate goal when combining technical tools like Fibonacci with support/resistance?

To identify higher probability trades, which increases the chance of coming out ahead in the long run.

What key concept in trading does combining tools support?

Trading is all about probabilities.