Retracement forex strategy

Retracement Forex Strategy

The retracement forex strategy involves identifying potential reversals in price action by looking for areas where the price pulls back or «retraces» after a significant move. Traders then place trades in anticipation of the price continuing in the original direction once the retracement is complete.


Fibonacci retracement levels: These horizontal lines represent key support and resistance levels where the price is likely to retrace before continuing in the original direction.
Moving averages (MAs): MAs help identify the overall trend and potential support/resistance zones.
Support and resistance: These levels mark areas where the price has consistently bounced back in the past.

Strategy Steps:

1. Identify the Trend: Use MAs or trendlines to determine the prevailing uptrend or downtrend.
2. Wait for a Significant Move: Look for a strong breakout above resistance (uptrend) or below support (downtrend).
3. Identify the Fibonacci Retracement Levels: Determine the retracement levels (23.6%, 38.2%, 50%, 61.8%, 78.6%) based on the previous trend move.
4. Look for Support/Resistance: Check if the price retraces to key support or resistance areas, such as Fibonacci levels, previous support/resistance levels, or MAs.
5. Enter the Trade: Place a buy order (uptrend) or sell order (downtrend) near the identified support/resistance level.
6. Set Stop Loss: Place a stop loss order below the support level (uptrend) or above the resistance level (downtrend).
7. Take Profit: Set a profit target based on the original trend move or key resistance/support levels.


Uptrend: Price breaks above a resistance level at 1.1000.
Retracement: Price retraces to the 38.2% Fibonacci level at 1.0950.
Support: Price finds support at the 38.2% level.
Trade Entry: Buy order placed at 1.0960.
Stop Loss: Placed below the support level at 1.0940.
Profit Target: Based on the previous breakout move to 1.1000.

Читать статью  Which forex broker is good


Simple and easy to understand.
Can work in both uptrends and downtrends.
Provides clear entry and exit points.


Retracements can be short-lived or lead to trend reversals.
Retracement levels are not always reliable.
Can result in false signals if the price fails to continue in the original direction.


Use multiple confirmation criteria, such as Fibonacci levels, support/resistance, and trendlines.
Be patient and wait for the price to complete the retracement before entering the trade.
Manage risk by using stop-loss orders.
Consider using a reward-to-risk ratio of 1:2 or more.

Добавить комментарий

Ваш адрес email не будет опубликован. Обязательные поля помечены *