Caution when trading Fibonacci

As with any trading tool there are times when it works and other times when it does not work as expected. It could be as simple as an important news release that overrides technical indicators or a combination of multiple (technical and/or fundamental) factors. In using Fibonacci Retracement, there a two concerns;

1. Identifying the low, high and drawing the Fibonacci line is tricky. You will get the best result when you have a majority of the candlesticks aligned on the line.

2. As you would remember from the support and resistance tutorial, these levels are indications of how price activity might follow. In reality these levels can be broker when a majority of the market believes there are stronger reasons for the currency pair to behave against any one tool.

In the Support and Resistance tutorial you saw as to how these levels can be broken. Its also true for support and resistance derived through Fibonacci levels.

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