Trade Bitcoin Trading

Drawing Fib Retracement Areas on Upward Bitcoin Trend & Down-wards Bitcoin Trend

The price of Bitcoin Crypto Currency does not move up/down in a straight line. Instead price of Bitcoin moves up or down in a zigzag pattern. Fibonacci Retracement is the tool used to calculate where the zigzag will stop. The pullback levels are 38.2 %, 50 % & 61.8%. These points form the levels at which the market is likely to make a retracement.

What is retracement? A retracement is a pullback of the price before the market resumes the original trend/original direction of movement.

Example of Zigzag Movement: The Example below illustrates price heading up in a zigzag pattern.

The diagram below shows this movement in an upward trending market.

How to Draw Fibonacci Retracement on Upward Bitcoin Trend & Down-wards Bitcoin Trend

1-2: Price moves up2-3: Price Pullback3-4: Price Moves up4-5: Price Pullback5-6: Price Moves up

Since we can spot where a pullback starts on a Bitcoin price chart, how do we know where these pull backs/retracements will reach?

The answer is we use Fibonacci retracement areas

This is a type of line study used in Bitcoin trading to predict and calculate the market price retracement levels. This Fibonacci retracement indicator is placed directly on the Bitcoin price chart within the MT5 platform provided by your online broker, This Fib retracement levels indicator will then automatically calculate these price pull back zones on the BTC/USD Crypto Currency chart.

What are the Fib Retracement Levels? 23.6 % Fib retracement level38.2% Fibonacci retracement level50.0 % Fib retracement level61.8% Fibonacci retracement level

38.2 % and 50.0 % Retracement Areas are the most commonly used and most of the time this is where the price pullback will reach - with 38.2 % Fib retracement level being the most popular and the most widely used.

61.8% Fibonacci retracement level also is commonly used to set stops for trades opened using this trading strategy - because price retracement will not get to this retracement level most of the time.

This Fibonacci retracement zones tool will be drawn in direction of the Bitcoin price trend as explained in the examples below.

How to Draw Fibonacci Retracement Areas on an Upward Market Trend

In the diagram below the Bitcoin price is heading up between 1 and 2 then after 2 it retraces down to 50.00% Fibonacci retracement level pull back level then it continues moving up in the original upwards trend. Notice that this indicator is drawn from point 1 to point 2 in direction of the Bitcoin price trend (Upwards trend).

Because we know this is just a retracement/pullback based on our experience using this indicator - Fib retracement level, we put a buy order just between the levels 38.2% & 50.00 % retracement levels and our stop loss just below 61.80 % pullback level. If you had put a buy at this point in the trade example below you would have made a lot of profit as illustrated below.

Drawing Fib Retracement on Upward Bitcoin Trend & Down-wards Bitcoin Trend

Fib Retracement Levels Drawn on an Upward Bitcoin Price Trend

Explanation for the Above Fib Retracement Setup Trade Example

Once the Bitcoin price hit the 50.0 percent% Fibonacci retracement level, this zone provided a lot of support for the market price, and afterward market then resumed the original upwards trend and continued to move up.

23.6 % Fibonacci retracement level provides minimum support and is not an ideal place to place an order.

38.2 % Fibonacci retracement level provides some support but price in this example continued to retrace upto the 50 percent% retracement level. Most of the times traders will place their buy limit orders at this level - 38.2 % Fibonacci retracement level.

50.0 % Fib retracement level provides a lot of support & in this example, this was the ideal place which to place a buy order.

For this example, the retracement reached the 50.0 % pull back level, but most of the time the market will retrace up to 38.2 % and therefore most of the time Bitcoin traders will set their buy limit orders at the 38.2 % Fib retracement level, while at the same time placing their stop loss just below 61.8 % Fib retracement level.

How to Draw Fibonacci Retracement Areas on a Downward Market Trend

In the diagram below the market is moving down between 1 and 2, then after 2 it retraces up to 38.2% Fib retracement level & then it continues heading down in the original downwards trend. Notice that this Fibonacci retracement indicator is plotted from point 1 to point 2 in direction of the Bitcoin price trend (Downwards trend).

Because we know this is just a pullback we put a sell order at 38.2% Fibonacci retracement level and a stoploss order just above 61.80 % Fibonacci retracement level.

If you had put a sell order at the 38.2 % Fib retracement level as shown on the trade below you would have made a lot of profit afterwards. In this trade the retracement reached 38.2% Fibonacci retracement level and did not get to 50.00% Fib retracement level. From experience it is always good to use 38.2% Fibonacci retracement level when trading BTCUSD cryptocurrency because most times the pull back does not always get to 50.00 % retracement mark.

Fibonacci Drawing on Bitcoin Charts Exercises - How Do I Draw Fibonacci Retracement on Upward BTCUSD Trend & Down-wards BTCUSD Trend?

Fib Retracement Levels Drawn on a Downward Bitcoin Price Trend

Explanation for the Above Fibonacci Retracement Setup Trade Example

The above example is the perfect setup where the price retraces immediately after touching the 38.2 % Fib retracement level.

This Fibonacci retracement zone provided a lot of resistance for the market price pullback: this was the best place for a BTCUSD Crypto trader to place a sell limit order as the market quickly headed down after hitting this 38.2 % Fibonacci retracement level. For this trade a trader would have put their stop loss order at the 61.8 % Fibonacci retracement level.

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