The 23.6% Fibonacci retracement is the shallowest Fibonacci retracement before the 38.2% level.
However, it is not as popular as the 38.2% or 61.8% Fib level. In fact many technical traders do not know what to do with the 23.6% Fibonacci retracement. Though many articles have been written about other Fibonacci key levels, one will rarely find one about 23.6%. Though, it is easier to find ready made Fibonacci retracement trading strategies, not many include 23.6% Fibonacci retracement. Far from being a useless Fibonacci retracement level, 23.6% Fibonacci retracement can help one to spot strong momentum financial instruments.
How To Use 23.6% Fibonacci Retracement
There are many ways that a technical trader can use 23.6% level. Nevertheless, this is what I suggest.
Open a monthly chart, add the moving average ten or twenty to it.
Now highlight the 23.6% Fibonacci retracement after the price rose from A to B and pulled back to a point C.
If the point C is on or near MA 10 or 20 and also at 23.6% Fibonacci retracement (see chart below), one will implement a different times frame trading strategy to take part in the trade as soon as the common sense trend line is broken.
On the other hand, a bearish trade setup is in place if the price rallies into the 23.6% Fibonacci retracement on the edge of the moving average ten or twenty after a bearish impulse move. Once again the common sense trend line that rally must be broken.
Other 23.6% Fibonacci Retracement
Tips And Tricks
A swing trader may open the monthly and draw all the 23.6% Fibonacci retracements
where the price did find a support or resistance in the past. Note that those key levels are more robust support and resistance levels.
After drawing them, a swing trader will switch to the daily chart.
The purpose is to identify and trade daily chart trade setups in the vicinity of any of those monthly chart 23.6% Fibonacci retracements levels.
One is not just using every 23.6% Fibonacci retracement key level but only those that have been converted into a valid support or resistance level in the past.
Please do not forget that.
Like the swing trader, a day trader can duplicate the same strategy, but by combining the daily and hourly charts.
Similarly, a position trader will use the yearly and monthly charts for the same purpose like the swing trader.
Warning To New Traders
Understand that a trading setup is a trading invitation or opportunity, but it is
not the signal. One must always use a
different times frame trading method.
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