Hello everyone,

We are back in the MT4 software, where we take a day as a trading standard, and then we proceed to draw the Fibonacci retracement levels.

The Fibonacci retracement is not an indicator; it is a tool for our analysis, which can be found in the toolbar of the software. Once you've found it, how do you go about drawing it?

1. How to draw the Fibonacci retracement levels?

For intraday trading, open the 5-minute chart and it's best to adjust your chart to display time intervals.

Right-click on the chart to access properties, and under the common settings, there is an option for "Display Time Period Intervals." Once you have it displayed, it will divide the daily candlestick movements into time segments, providing a better point for drawing the Fibonacci retracement levels, making it easier to find the high and low points.

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We use the 5-minute chart to select the relative high points, or the highest and lowest points of the day, and connect them. Draw a line from the high point to the low point; this is a common method of drawing.

2. After drawing, how do we apply it?

When using the Fibonacci retracement levels, we should pay attention to several key points, as shown in the following chart:

The first is the 38.2% level, the second is the 50% level, and the third is the 61.8% level. There is actually a fourth level as well. In the chart, right-click and select "Fibo Properties," choose Fibonacci, and add a time zone.

(Note: The original text seems to be cut off at the end, so the translation ends accordingly.)In reverse, what does it actually represent? It's the position at 236, where we make it symmetrical up and down.

The Fibonacci Golden Ratio, also known as the retracement line, is a rather mysterious set of numbers. Let's not delve into these numbers for now, as they pose a riddle that is difficult to solve worldwide, and these numbers are quite magical. What we're looking for is the points to select from them.

We can start searching for these points from the position at 50. Every 50th position, 618th position, 764th position, they all exert a suppressive or supportive effect on our price.

If the price is falling and it retraces to the 50th position, then this position will exert a pressure effect on the price. Next would be the 618th position, followed by the 764th position, and then it would be the 0th position, right? In other words, its starting point of decline, we select the highest point within a day.

If the price has reached the highest point within a day, what does it prove? It proves that it has undergone a V-shaped reversal.

All these positions, from the 50th to the starting point of decline or rise, will exert pressure or support on the price. Since this position will exert support or pressure on our price, it is also the position we use the Golden Ratio to find an entry point.

Look at the area I've drawn; this position is the 50th of the Golden Ratio. The price fell all the way and retraced to the 50th position, where the price stopped.

Looking at the five-minute K-line, we notice that it consistently has a long upper shadow, right?

So at this time, we can execute a short position plan at the 50th position.

When our profit reaches five or ten points, we exit quickly. This is how we use the Golden Ratio to find the first retrace point, which is also the first entry point, starting from the 50th position.So, moving forward, we find that this is the 618th position, and this is the 764th position. The 618th position is quickly breached, and after the quick breach, you also consider that it is close to the 50th position, with a relatively short time interval. Therefore, at this time, it might be possible that, first, we cannot enter a position, and second, because the interval is short, we may not necessarily want to trade.

However, when it comes to the 764th position, it's a different story. From the low to the high point, there is a rapid increase in volume that quickly breaches the 764th position. This position, like the 50th, provides us with a short-selling opportunity. We quickly execute a short-selling plan at the 764th position.

Let's take a look at the short position. Once we enter, the price retraces, and during this process, we can capture a profit of about 10 points, and then we quickly exit.

Using this day as an example, if we only use the Fibonacci retracement levels for trading, we have two major trades with a success rate of 100%. After entering, the price quickly retraces, and we quickly exit, which are two very good entry points.

3. Precautions for using the Fibonacci retracement levels

When we apply the Fibonacci retracement levels, we need to pay attention to several points. It's not that we can trade at every position; we need to learn to filter, which is a key aspect of using them.

It's not the case that we can trade at all positions, and it's not that when we reach the 50th, 618th, or 764th positions, we should trade. That's not how it works.

Firstly, when we use the Fibonacci retracement levels for retracements and trading, we need to consider the intraday space and how it has been operating, meaning we need to determine the approximate range between the 0 and 100 points.

Let's take gold as an example because the normal fluctuation range for gold should be around 100 points, or more than 80 points, which is the current normal operating range for gold.

When we draw the Fibonacci retracement levels, there must be space. Personally, I believe it should be higher than 60 points, meaning close to the intraday fluctuation range. Only by doing so can you increase your chances of success, and that's the first point.Because what we are doing is a retracement of it, that is to say, a retracement of the overall amplitude.

Imagine if the overall operating space is only 30 points, and we do a retracement of 50 points, which means there are only 15 points left. At this time, if you trade, it is meaningless. It is possible that the market is just entering a consolidation process, and drawing the Fibonacci retracement levels at this time is obviously wrong.

So when we apply it, it must be after the market has made a one-sided move, either a one-sided decline or a one-sided rise. The market must have made a significant move before we draw the Fibonacci retracement levels.

When we look for the retracement points, is the 50% level effective or the 61.8% level? This depends on specific timing.

Why didn't we just mention the 38.2% level?

Let's assume a move of 60 points; if you draw a 38.2% retracement, it means that a retracement of just over 20 points would reach that level, which is clearly too small a space. If the space is too small, our profit will definitely be smaller when we enter. Therefore, if we enter at the 38.2% level, the profit and loss are not proportional, so we choose the 50% level.

Under normal circumstances, when we observe the intraday market movement, you will find that a one-sided small wave amplitude of gold usually moves 30 to 50 points, which is a normal pattern.

So what do we use as a reference value?

A Fibonacci retracement reference value should be more than 60 points, even 70 to 80 points or even 100 points. If we use a 50% retracement, then the space from the low point to the high point is about 40 points, at least more than 30 points.

In this way, when we trade its rebound, the profit space from its retracement can at least be 50 points or 100 points, which means there is a profit space, and it is worth our trading.So, should we choose 50, 618, or 764 for trading?

Let's first examine the scenario if we opt for the first choice of 50: when the price rises from the low point to the 50th position, does it surge rapidly with increased volume? Or does it ascend after a period of consolidation? If there is a beautiful consolidation before the rise, then we should abandon the 50th position and consider the 618th position.

In other words, the core point of choosing whether to enter at the 50th or 618th position is that there should be no consolidation ahead, and it should ideally be a one-sided wave that rises to the 50th or 618th position, which is our chosen entry point.

Let's look at the 50th position, which is pulled up from the low point below, 1222, to 1225.6, creating a space of 30 points, and it is pulled up without any consolidation in between.

At this time, we choose to enter, and it has a success rate because it has already surged by 30 points in a one-sided volume increase. We take a contrarian position to catch the reversal, and there is a profit space when we enter the retrace, so we choose such a point to enter.

For the 618th position, we may not have the first choice, and the second may also be possible to enter, but if you enter at this position, it won't make a big mistake. After all, from the low point to the high point, there is a running space, and there is also a 30-point space without consolidation in between.

The only downside is what?

It is close to our 50th position, and the space of the price break, which is also a relatively short time point. If we do this, it is possible that the price is a new step of the break wave, and the position of the break just now is the entry point, which is not very good.

So at this position, what would an experienced trader choose? They would choose to give up, and we give up the 618th position. Because once we have done the 50th position, we give up on the 618th. Since the space from the 50th to the 618th is too small, we place the entry point at the 764th position.

Because from the low point to this position, there is a profit space of 50 points. So, this position is an excellent spot to catch a rebound.So, that concludes our discussion on how to use the golden ratio (golden section) to select entry points for trading.

When applying this method, we must consider it dialectically from multiple perspectives, combining it with various indicators to make a comprehensive assessment of whether this position is the best entry point, whether it's at the 50%, 61.8%, or 76.4% level.

If anyone has any questions, please leave a comment, and we can delve into a more in-depth discussion.