Fibonacci correction and extensions are known to be fairly reliable indicators when used alone. Often, they can accurately predict lines of support and resistance throughout a security’s trend, and this can help set price targets that, if used properly, can help the trader make a big profit. However, as with any indicator, the best results are usually accumulated when a combination of indicators is used to provide more substantial evidence. Fibonacci adjustments and extensions can be used in conjunction with well-known candlestick patterns, and if used successfully, both indicators can predict a price reversal that is likely to occur if a security hits a line of resistance or support.
Typically, traders will always use a combination of indicators to help them decide when to enter and exit the market. The reliance on each specific indicator can be restrictive and often does not provide sufficient evidence to make decisive decisions. By combining indicators with Fibonacci correction or extension, the trader can be much more confident when invading the market because they will be provided with evidence from two separate sources. The use of Fibonacci withdrawals and extensions in conjunction with other indicators significantly increases a trader’s chances of success, because if two or more indicators suggest the same market movement, this is likely to happen. Conversely, if one indicator assumes that the market will move upwards, while another indicator assumes that the market price will move downwards, this indicates to the trader that entering the market at this time may not be a reasonable idea as there is a significant degree of uncertainty. .
Fibonacci adjustments and extensions can be used in conjunction with candlestick models to help provide more convincing evidence when a trader is considering entering and exiting the market. Candlestick models are perhaps the most basic form of indicator available to the trader, but this does not make them inappropriate or a waste of time. When used properly, some candlestick models are known to be incredibly reliable and can accurately predict a reversal of prices or a continuation of a trend. One particular model of candlestick that is well known for its consistency and reliability is the doji star. This happens when the price of a security opens and closes at the same point for a certain period. As the name suggests, the candlestick looks like a star in the shape of a cross, unlike a candlestick, and when this is witnessed, the trader can be sure that a reversal of the price is likely to occur.
The doji star candlestick model can be used in conjunction with Fibonacci correction and extension to predict price reversals at significant points of support or resistance. For example, if a point of resistance has been highlighted by a Fibonacci correction, the trader should look for a doji star when the price approaches the resistance. This will confirm whether the price is likely to bounce or likely to break the resistance and continue. If it looks like the price will bounce, the trader should make a sale.
Combining Fibonacci analysis with high-probability candlestick models is a great way to increase the accuracy of both valuable tools.