By Nathan Pennington
How far will the price retrace? Ever asked that of yourself and you watch the price move down off of a high (of course, your fib lines are already drawn in).
Keep in mind that often the price won’t bounce exactly on a line. Knowing that fact you need some clues of where it might stop. What exactly are you looking for?
Very often the market won’t jerk one direction and then another if it’s making a meaningful move. There will be a period (however short) of consolidation. That will show up in the price chart.
Look for times when the price gets a little bunched up. Are the candles (or bars) getting smaller? That’s a huge clue. You know that a turning point may be just around the corner.
Then next think you need is confirmation. Too many Fibonacci traders jump on in anticipation of the market turning around. That’s not a good move unless you have enough capital to move the market yourself (you don’t).
Let the market tell you that it wants to go in your direction, then enter your order.
If the market doesn’t have a period of consolidation and it’s behaving jerky, most likely it isn’t a meaningful move. In other words, it was caused by a rash move of one (or several traders) in a time of less liquidity. Trading such a move is a good way to become separated from your trading capital.
Watch the for the slowdown around the major retracement levels and be ready.
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Nathan Pennington is a forex trader and the author of [http://www.winningforextrading.com]Winning Forex Trading -THE Definitive Guide
This article was originally published By www.ezinearticles.com
