# Trading binaries with the fibonacci tools

They occur all the time and a trader needs to know how to use retracements to his advantage. This is what the Fibonacci retracement tool does for you. The tool plots five horizontal lines on the charts which correspond to 5 possible areas to which prices may retrace, with the distances expressed in terms of percentage of the original move:.

Prices can retrace to any of these points. So how would you use the retracement tool to trade binary options? I would therefore choose the Daily chart. Note that by selecting this chart, I have already fulfilled my first two trade conditions. It is a daily chart, showing me when a retracement is actually occurring, and the EURUSD trends well, being the most actively traded currency pair in the market.

I am now looking for how to fulfil my third condition, which is actually my trade objective. I want to pick a strike price at a point along the course of the price retracement, between the market price and the To do this successfully, I must be sure that a retracement is actually in progress.

How do I confirm this? The bullish momentum of the EURUSD has actually been checkmated by the formation of a reversal candlestick pattern, a bearish harami. An expanded version of that point is shown below:. Occurring at the peak of a bullish momentum is a clear reversal signal. Trading binary options is not rocket science. I would recommend practicing this strategy at a reliable broker which offers short term trading options. Learn Fibonacci basics and how to draw Fib lines.

The name comes from the famous Italian mathematician Leonardo Fibonacci who developed a sequence: The Fibonacci retracement is calculated by dividing the higher numbers in the sequence: In trading the Fibonacci retracement is simply a drawing tool which separates the chart in the following levels: The idea is to locate a trend on the chart up or down and pullback retracement after which the trend will continue in the same direction.

You have to enter the market at the pullback with a Call or a Put option depending on the trend Up or Down. You need to draw the Fibonacci lines in the direction of the move in order to locate the retracement — the point where you trade. In an uptrend you draw the Fib lines form the Lowest to Highest point of the trend and the opposite way for a downtrend.

When you are using the Fib tool your aim is to define at which level the price action will stall. Ideally the retracements will start on the There is a small pullback on the