Fibonacci convergence, clusters – trading, drawing – guide
The convergence can be very useful, but for new traders, it is hard to use. It is not that complicated, which I will try to show in this chapter.
Before trading with the Fibonacci convergence you should feel comfortable with using the Fibonacci retracement and extension levels. You should be able to easily choose the price swings to draw them. If you are not that experienced, do not worry! Just read this chapter or skip it and return to study it later when you will have more experience in using the retracement and extension.
At the beginning, I wrote that the price moves in a zigzag formation. I showed you how you can choose the swing to draw the Fibonacci retracement or extension. Trends are built upon many different swings. The convergence is a situation when you draw the Fibonacci retracement lines for more than one swing and when some of the levels are close to each other.
In the example below the price moves up making many swings. There are a couple good points to choose to draw the Fibonacci retracement. Which one would you choose?
The one below is very easy to spot, so of course we can use this low and high and draw the retracement levels:
We can also use high and low from a bigger move, where the price moved back to the 38.2% retracement line. This is the same chart as the one above:
When we put these two retracement levels together, we will see that some of them are
very close to each other:
You can notice that the first convergence level was 38.2 (red) and 23.6 (blue), but the price did not stop there. The second level of convergence was at 61.8 (red) and 38.2 (blue). The price found strong support and from that point, the uptrend continued.
The advanced guide to fibonacci trading - parts:PART 1. INTRODUCTION
Basic information about Fibonacci numbers and why it is good to know how to use them.
PART 2. THE FIBONACCI RETRACEMENT LEVELS
How they are build and how to draw them to find possible leveles during correction.
PART 3. THE FIBONACCI PROJECTIONS
How to predict where is the best place to exit trade - Fibonacci Extension and Expansion will be helpful here.
PART 4. THE FIBONACCI CONVERGENCE
Learn what convergence is and how to spot it.
PART 5. WHEN TO ENTER A TRADE – A SAFE SCENARIO
Here we put knowledge into practice - you will learn a safe way of opening positions.
PART 6. WHEN TO ENTER – A RISKIER SCENARIO
Little bit riskier scenario of opening trades where possible profit is bigger.
PART 7. WHEN TO EXIT A TRADE
Closing trade is very important, but where is the best place? This should help you to find the best place to exit.
PART 8. MY TEMPLATE
Few examples of different templates you can use in Metatrader software.
PART 9. A FEW IMPORTANT THINGS YOU SHOULD KNOW
How to define trend, the importance of the higher time frame and how to trade the news with Fibonacci tools.
PART 10. FIBONACCI AND PIVOT POINTS
How to combine Fibonacci tools and pivot points.
PART 11. MONEY MANAGEMENT
Proper money management is very important - without it you will be loosing money fast.
PART 12. MORE EXAMPLES OF TRADES
More exapmles where we put together knowledge from guide.
13. THE “HOW-TO” ARTICLES
Few helpful articles about installing templates and using Fibonacci tools.