But we ain’t done yet!
In this chapter, we will show you how to use Candlestick patterns at Fibonacci retracement levels, and what you should be looking for.
As you already know, candlestick patterns tend to be reliable signals of a reversal in price action.
Therefore reversal candlestick patterns at Fibonacci retracement levels portray a strong signal that price is likely to change direction.
When combined together, the goal is to look for exhaustive candlesticks.
It’s simple. If you can tell when buying or selling pressure is exhausted, it can give you a clue of when price may continue trending.
Below is a 4-hour chart of EUR/USD.
The pair seems to have been in an uptrend for the past couple of hours, but the move seems to have paused for a bit.
Will there be a chance to get in on this uptrend?
Let’s put the Fibonacci retracement tool to work!
As you can see from the chart, we’ve set our Swing Low and Swing High and drew Fibonacci retracement levels.
We can clearly see a candlestick pattern formation on the Fibonacci levels. It seems that it formed a bullish engulfing pattern.
Confirmation for a buy signal?
We’d say so!
Let’s take a look at what happened afterwards.
You can see the level held well and the market continued to move to trade profit direction.
If you had placed your order anywhere around the Fibonacci levels, you wouldn’t have been disappointed!
This just comes to show that when you combine the Fibonacci retracement tool with candlestick patterns, you automatically increase your chances for a winning trade.
And we all like winning…