Lesson 4: Learn Forex Combining Fibonacci
with other technical analysis tools
Since drawing Fibonacci retracements is very subjective, it’s useful to combine
it with other technical analysis tools.
Combining FIBS with polarity change.
A great way to use Fibonacci retracement is to look for the FIB levels which
interact with old support and resistance lines - like here. Price broke the previous
highs and started pulling back.
The old resistance should become the new support, so you might be going
long on the retest of this level. Many traders have problems choosing their stop loss
levels; FIBS are especially useful in situations like this, as you can simply put your
stop loss a couple of pips below the 61.8% retracements.
Combining FIBS with trendlines and channels
The price is in a strong up-trend. After making the next leg higher, you need to
wait for a retracement before going long. By drawing FIB retracement, you can
project the potential point where the price will hit the trendline and set your buy
orders there.
Combining FIBS with RSI
We have already learned how to use the RSI momentum triggers to help us
determine price reversals. Combining that with FIB retracements, works like magic!
The price is stalling at the 38.2% FIB retracement. Normally, it would be
risky to sell based only on FIB retracement, as it could go up further. However, as
the RSI has already broken the bullish momentum, it is signaling that the
retracement up-trend has finished and the price is ready to resume its down-trend.