Everything You Need to Know about Fibonacci Trading – Part 3

Fibonacci Retracements are NOT Flawless — They Break

Did you truly believe that there was any single variable in the world of trading that would provide you with everything that you needed to invest perfectly every time?

Unfortunately, that is not how trading works. There are a lot of indicators that are useful to help inform your trades, but you should not deceive yourself into thinking that any given indicator is the only piece of information that you require in order to trade well.

It turns out that the Fibonacci retracement tool is very popular with many traders, and that is all fine and good, but you should know that it has known flaws, and there are reasons to doubt that it will always come through for you when needed.

Fibonacci Levels Don’t Always Hold As Expected

One of the lessons that you are likely to learn as you continue trading is the fact that Fibonacci levels do not always hold in the ways that you would expect.

You could see what seems to be the perfect candlestick setup on a given trade and want to put everything you have into buying or selling that currency pair based on what you see there, but you will be making a grave mistake if you actually do this…

The problem is that Fibonacci levels do not hold up as expected when subjected to a variety of challenging real-world market conditions. What people fail to grasp in some cases is that the charts that they drew up were on too short of a time scale.

When the larger trends continue to prevail, you can get wiped out on a trade that you thought for sure was going to work to your advantage.

You should set your Fibonacci levels up as a reference point, but don’t convince yourself that they provide every last piece of data that you will ever need.

The truth is, they are just a great place to begin to get an idea of where a currency pair may be headed.

It is far more important that you think about the time frames and other factors that play an equally large role in your trading. If you can do that, then you will be in great shape to become a more successful trader who has a better grip on profits and makes the most of the various indicators that he or she sets up on a trading chart.