By Mark Deaton
Fibonacci extensions and retracements can be used for a number of purposes during trading. Traders often use them in conjunction with other indicators to help provide more substantial evidence when exiting and entering the market and this is an especially useful technique that can lead to handsome profits.
On the other hand, some traders prefer to use Fibonacci retracements and extensions on their own because they are known to accurately predict significant support and resistance lines for a security.
Using Fibonacci retracements on their own can be especially handy when a trader is aware of the tricks and techniques that are available whilst using this indicator. With practice a trader can become fully versed in the signals to look for and the tricks to use when employing Fibonacci retracements and one of these useful tricks is being able to exploit continuation gaps.
Any trader hoping to take maximum advantage of Fibonacci retracements and extensions will need time to analyze the behavior and reliability of the indicator. As a trader begins to gain a more complete understanding of the indicator they will be able to use it more easily and more comprehensively.
Experienced traders will be fully aware that there are a number of tricks available to a trader who uses Fibonacci retracements and extensions. These can be utilized to help make more effective decisions and can aid in making better profits when entering the market.
Fibonacci retracements and extensions can be especially useful when a continuation gap is noticed during the trend of a security. If analyzed correctly the Fibonacci retracement can be laid accurately on top of the continuation gap and this can help predict the top price of a trend.
With this key information, traders can accurately predict price targets at the top of a trend and they can place pending sells under the assumption that a price is likely to reverse steeply once this ceiling is hit.
The continuation gap is a characteristic displayed on a candlestick chart. When a trend is particularly strong and heading in a bullish direction, often after a candlestick has finished the next candlestick can open at a much higher price than the previous one closes.
On some occasions, the opening price can even be higher than the high price of the last candlestick and this creates a large gap between the two candlesticks.
If this characteristic is noticed a trader should find the low point of that trend and lay a retracement over the top of the candlestick chart so the 50% ratio is halfway in between the continuation gap.
They will find that the projected 100% ratio will often end up being an accurate approximation of the eventual ceiling price of that trend.
By taking advantage of the continuation gap in this fashion a trader can make accurate future price targets and enter the market with confidence.
However it should be noted that occasionally a continuation gap can also be an exhaustion gap in which case the trend runs out of steam and reverses unexpectedly.
Careful rel=nofollow [http://www.fibonaccigenius.com/fibonacci-analysis.html]Fibonacci analysis is a must and your ability to determine precise entry and exit depends on it.
Fibonacci retracements and extensions provide key zones of potential reversals and continuations. If you want to master Fibonacci analysis in a matter of hours visit our site and download the "Who, What and How Of Fibonacci Analysis" - http://www.fibonaccigenius.com
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