Fibonacci Trading Strategy (Examples, Rules And Backtest)

There are many indicators and tools for technical analysis, but only a few have leading properties like the Fibonacci tools, which is why Fibonacci trading is popular among traders. But how do you trade a Fibonacci trading strategy?

A Fibonacci trading strategy is the use of Fibonacci tools in making a technical analysis of a security price. The popular Fibonacci tools include the Fibonacci retracement tool, the Fibonacci expansion tool, and the Fibonacci fan.

These tools are used to indicate where support and resistance are likely to occur on the chart, which helps a trader to plan his trade entry and exit accordingly.

In this post, we take a look at Fibonacci tools and how to use them. At the end of the article, we provide you with some backtested Fibonacci trading strategies.

What is Fibonacci trading?

Fibonacci trading is the use of Fibonacci tools in making technical analyses. The popular Fibonacci tools include the Fibonacci retracement tool, the Fibonacci expansion tool, the Fibonacci fan, the Fibonacci channel, and so on. These tools are used to indicate where support and resistance are likely to occur on the chart, which helps a trader to plan his trade entry and exit accordingly.

Not only can the tools be used to predict potential support and resistance levels in the market, but they also mark these levels before the market gets there. In other words, they lead the price, unlike moving averages and other indicators that lag the price. With this remarkable property, traders can anticipate what will happen ahead of time so that they can plan what to do.