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HOW TO MEASURE THE PROBABILITY OF 38.2% FIBONACCI RETRACEMENT LEVEL BREAKOUTS

Hello traders, it is 2:46 PM, Saturday, February 28, 2015 (EST) in New York, USA. I am on my PC to write a post on the Fibonacci 38.2% retracement level breakouts. It is very important in forex trading to know the probability of Fibonacci 38.2% breakouts after a reversal. I already mentioned that a forex trading strategy cannot be a winning one with out the application of Fibonacci retracement tool. 

Let see how the probability of a Fibonacci 38.2% retracement level breakout can be measured.

In the above price chart, we can see after the strong bearish trend reversal the price moved to the 38.2% Fibonacci retracement level and pulled back to reach the L2 (Low-2). Here the price again reached the Fibonacci 100% retracement level of L1 after reaching the R1 resistance level. 

Then the price was again pushed to the Fibonacci 38.2%, and the price could not break the Fibonacci 38.2% retracement level and pulled back to L3. After the pull back, the price reached the Fibonacci 38.2% retracement level for the third time and became able to break the 38.2% retracement level. 

In the above price chart, another situation of 38.2% Fibonacci retracement level breakout is illustrated. Here when the price reached to the 38.2% Fibonacci retracement level for the first time just after the reversal, it was pulled back to the L2. 

Here we can see the L2 is a higher low, in other words price was pushed to the 38.2% after reversed from the L2, which is higher than the L1. The 23.6% Fibonacci retracement level became the strong support point. The 38.2% Fibonacci retracement level was broken by the price at second attempt.

In the above price chart, a bullish trend is reversed at H1, and reached to the 38.2% Fibonacci retracement level. When it first reached to 38.2% Fibonacci retracement level, it could not break the support level, and pushed back to H2. 

H2 is placed at the 23.6% Fibonacci retracement level, and 23.6% line represented strong resistance level. Here we can see the price became able to break the 38.2% Fibonacci retracement levels at second attempt. 

By studding more than 100 situations as above, I came to the following interpretations.
  1. When the price reaches to the 38.2% Fibonacci retracement level for the first time after the reversal of a trend, a breakout of 38.2% Fibonacci retracement level is rarely found.
  2. When the price reaches to 38.2% Fibonacci retracement level and pulled or pushed back to the 100% Fibonacci retracement level of previous low or high, a breakout of 38.2% Fibonacci retracement level rarely happens.
  3. When the price reaches to the 38.2% Fibonacci retracement level for the third time, a break out is highly expected.
  4. When the 23.6% Fibonacci retracement level represents strong support or resistance level, a breakout of 38.2% Fibonacci retracement level  is common.
  5. If the price fails to make a lower low or higher high, the brekouts of 38.2% Fibonacci retracement level becomes usual at second attempt.
Okay !
There is no universal truth in the theory of forex trading. Traders have to analyze the current fundamental and sentiment analysis in order to define the potential price movements. Only the practical market experience can make you a winner in the currency war.

I hope this post will help you to find the reliable entry and exit price levels, and to select the safe stop loss and to determine reachable profit target.

Drop a comment below, If you have any questions !!!

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