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Fibonacci Retracement Levels: Futures Trading Strategies

Fibonacci Retracement levels are a component of technical analysis that can assist traders in analyzing and trading market trends and channels. When used to help identify pullbacks and price reversals, Fibonacci Retracements rely on calculated levels to provide insight.

The most frequently used Fibonacci Retracement levels on charting software are 38%, 50% and 62% pullbacks from a mid-trend or channel temporary peak.

The S&P 500 (ES) chart below is displaying Fibonacci Retracement levels applied to a futures trading trend:

Apply Fibonacci Retracements to Trends

One way of using Fibonacci Retracement levels is to apply them to a market trend. After drawing a trendline between the high and low point of a trend, Fibonacci Retracements can then be applied to the top end of the price range and extend down to the low end of the price range.

The use of Fibonacci Retracements when backtesting a day trading setup allows you to identify:

  • The top and bottom levels of a trend
  • Retracement trading levels within the trend
  • When the financial instrument breaks the trend

Apply Fibonacci Retracements to Trading Channels

Another way of using Fibonacci Retracement levels is by applying them to a trading channel.

The S&P 500 Futures (ES) chart below is displaying Fibonacci Retracement levels applied to a trading channel:

After drawing a trendline between the high and low point of a trading channel, Fibonacci Retracements can be applied to the top end of the price range and extend down to the low end of the price range throughout the channel.

The use of Fibonacci Retracements when backtesting or trading a channel allows you to identify:

  • The top and bottom levels of a channel
  • Retracement trading levels within the channel
  • When the financial instrument breaks the channel

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