In the stock market, the Fibonacci trading strategy tracks trends in stocks. When a stock moves in one direction, some believe that there will be a pullback or decline in prices. Fibonacci traders claim that the pullback will occur at Fibonacci retracement levels of 23.6%, 38.2%, 61.8% or 76.4%. As noted below, a pullback is also possible for traders at 50%.
For example, if GE (NYSE: GE) sells for $ 20 and rises to $ 21, the pullback will be 23, 38, 50, 61, or 76 cents.
Some day trading experts view these Fibonacci numbers as a short selling strategy. For example, if a GE stock is worth $ 21 and falls to $ 20.62, some Fibonacci traders may see a 38-cent drop as a good sign to short the stock. For some traders, the Fibonacci retracement is a valid trading strategy for trading stocks. However, Fibonacci numbers are not always the best trend indicators.
“The Fibonacci retracement is a good tool to use when deciding if this is a good time to buy, but don't see it as the holy grail. In this volatile market, we tend to break levels. Make sure you have a shopping list that you like so you can pull the trigger when the time is right, ”Loboy said.
“We are in what I consider to be one of the best shopping opportunities in our lives. We have to make sure we play right - buy when the market breaks and average down with small orders, ”added Loeboy.
