BC FIBONACCI
Saved by @SAnngeri

90 million active demat accounts in India.

Less than 1% understand Fibonacci retracement.

This mega thread will help you understand better—starting today:

Collaborated with @AdityaTodmal

 1/What is Fibonnaci (Fibo) retracement?:

•Fibo retracement levels help us to identify potential reversal area or identifying potential entry point after a pullback.

•It represents various levels of significance within a swing high and low.
2/How to plot the Fibo?

•Spot the recent swing high & swing low (usually a peak & a low) on a chart.

•Plot the Fibo on these points.

•You'll get 5 key levels of support & resistance (S/R) in between the peak & low.

•Key Fibonacci ratios: 23.6%, 38.2%, 50%, 61.8%, & 100%.
3/ Importance of retracement levels:

• The retracement level forecast can determine the level at which retracement is likely to occur.

• These retracement levels offer traders a favourable entry to open new trades in the direction of the trend.
4/ When to apply Fibo:

•Fibonacci analysis can be applied when there is a noticeable up-move or down-move in prices.

•Applying it in range bound markets would turn out to be a futile exercise.
5/ Best TF to use for Fibo:

•Though it can be used on any time frame, for better results apply it on a higher TF, anything beyond 30mins.

•Higher the TF you choose, higher would be the holding period for the trade.

•Best TF to choose: Know your type & trading style.
6/How I use Fibo Retracements?:

• I look at larger TF's only for positional trading/ investing.

• While choosing a stock to get an entry, then I will focus only on strong fundamental companies.

• Can be used to make investment decisions in sectoral MFs or Index BeES.
7/ Examples for buying: Stock

•Lets say, you always wanted to purchase few qty of #DMART, but were unable to do so due to a rapid run-up in the stock.

•So wait for the stock to retrace for a favourable entry.

•P.S.: Like any indicator, use this as a confirmation tool.
8/ Examples for buying: Index

• First use the Fibo tool and plot it on the swing low and pull it up till the swing high, thereafter the FIBO ratios will get plotted automatically.
9/ Example to find resistance/ enter fresh sell trades in Index:

• Use the Fibo tool and plot it on the swing high and pull it up till the swing low, thereafter the FIBO ratios will get plotted automatically.
10/ Relevance of the key ratios:

• 23.6% retracement is rather shallow & is appropriate for flag breakouts or brief pullbacks.

• 61.8% retracement level, aka the golden ratio is relatively deeper, but crucial.

• Retracements between 38.2% to 50%, is regarded as moderate.
11/How pro traders use Fibo to initiate investing:

• Few months ago, one of the super trader @bhatiamanu Sir, had tweeted that he would look to start investing near 13k levels on Nifty.

• This number was arrived from Fibo retracement (refer chart 2)
12/ How to identify weak sectors?

• Unlike Nifty, which didn't even retrace by 38.2%,there are sectors which have retraced > 38.2%

•In other words the correction was relatively deeper than Nifty.

• Those sectors are essentially underperformers:
i) NIFTYIT
ii) NIFTYPHARMA
13/Conclusion:

• A trader can consider taking entry basis Fibonacci retracement only when other conditions are also fulfilled:

i)Formation of a reversal pattern
ii)The pattern formation & the retracement level should form near the long term S/R.
iii)Always have a Stop loss.
14/Few key points to remember:

• This is just the tip of the iceberg when it comes to Fibo retracement.

• I encourage you to do some back testing of your own on different TF's and check the results before taking entries.

• Also remember nothing works in isolation.
If you enjoyed this thread, here's another one which might be helpful:

https://t.co/81q0VY7PF6
Hope you discovered something new (because that's the point!)

If you did, share it with a friend

Hop back up to retweet the first tweet

See past threads here:

@AdityaTodmal

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@niki_poojary

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7 effective trading journal tools that you can use to make better decisions (instead of just maintaining a trading journal):🧵

Collaborated with @AdityaTodmal

Lets start with the harsh truth.

80% of traders just maintain a trading journal and never evaluate.

Recording your trades on day-to-day basis is just maintaining a trade book which your broker can furnish anytime.

Hence this exercise of recording trades is simply futile.

Things to record in the Trading Journal:

1.Long/ Short
2. Symbol
3. Qty
4. Buy Date
5. Buy price
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7. Sell price
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13.Days held
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15.Set up used

Once all the records are in place you need to build an analytics tool.

Trade records on its own is just the raw data which needs to be processed to derive info out of it.

Record your 50 or 100 trades.

Thereafter, analyse the following:

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1/Closing price different from the last trading price (LTP)

•There is so much noise regarding PE premiums going up or CE premiums losing their value tomorrow morning at the opening ( in case flat).

•Remember that the LTP usually differs from the closing price.

2/ This is because the closing price is the weighted average price of the last 30 mins of trading.

•The difference today is noticeably more as the market made a sharp upmove post 15:00 hours i.e. the last 30 mins.
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Start fibo retracement from swing high, not the other way around. Simply 0 point should b where retracement started
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The base should b chosen as major swing low. Can't just pick a random point
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🩸FIBONACCI retracement and GOLDEN RATIO - PART 2

Before we move forward, kindly like and retweet if you find our content is adding something to your knowledge.


We have described how interesting Fibonacci numbers and ratios are and how it's been formed in PART 1 of this series. In PART 2, Lets see how we take trade based on fibo.

🎯How to draw Fibonacci levels?
Drawing Fibonacci retracemnts are fairly simple. The main point we look into is, If the direction of retracment is up or down side.
✅ If the trend is up, choose lower point and a higher point. Connect lower point with higher point using Fibo tool.

✅ If the trend is down, choose higher point and a lower point. Connect higher point with lower point using Fibo retracement tool.

🎯How to choose lower and higher points to connect?
✅Take lower point as point from where the trend has started, which means one should not take points where consolidation was going on.
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This one's only on YouTube as @tradingview failed to upload
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#Nifty

I realized yday that nobody in my pretty large circle knows how fib levels are calculated on log scale. So here goes:

1. Take the highest high (HH) & the lowest low (LL) of the range
2. Next, take the natural log (ln function in excel) of the ratio HH/LL.

3. So, you now have the log returns, really the best way to measure them. Call it R.
4. Now take the difference between the natural log of HH and the fib ratio multiplied by the log returns
5. Say, ln(HH) - (0.382*R). Call it A
6. Finally, take exp(A)

That will be the level which corresponds to the 38.2% fib of the range between the HH and the LL on a log scale basis.

Big shout to to Dr Strange aka @shetty_ashish for this.
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