How to Use Fibonacci Retracement with Japanese Candlesticks

Baby Pips Elementary - Grade 3

What is a 'Fib Stick'?

A Fibonacci Candlestick: an exhaustive candlestick pattern (e.g., doji, pin bar) that forms right at a Fibonacci retracement level, hinting that buying or selling pressure has been exhausted.

Why combine Fibonacci retracement levels with Japanese candlestick patterns?

To improve trade entries by confirming whether a Fibonacci support or resistance level is likely to hold, based on candlestick evidence of exhaustion.

In a downtrend, where do you place the Swing High and Swing Low when applying Fibonacci retracement?

Click on the Swing High and drag down to the most recent Swing Low.

What does a long-legged doji forming exactly on the 61.8% Fib level suggest?

Possible exhaustion of buying pressure at that resistance level and an increased probability of a bearish reversal.

If price stalls at a Fibonacci level and prints an exhaustive candlestick, what is a trader’s potential action?

Enter a trade in the direction of the prevailing trend (e.g., sell in a downtrend) with greater confidence that the Fib level will hold.

What advantage does waiting for a 'Fib Stick' give compared with placing limit orders at Fib levels?

It provides visual confirmation that support/resistance is respected, reducing the need to guess or pre-place limit orders in a ‘zone’ of uncertainty.

Why do Fibonacci levels often coincide with strong support or resistance?

Many traders watch and place orders at these levels, making them self-fulfilling areas where price may react.