Setup - Generally when trying to do this you will need to find a chart with a reasonable trend in one direction or the other. In the above example, you have a downward trend which has been sustained over a day.
1st Fibonacci Level – Shown in yellow, I have started this from the first peak of the candle and put the level down to the first major bottom before the retracement.
2nd Fibonacci Level – Shown in Turquoise, was drawn from the low of the trend back to the first peaked candle.
Analysis – From these two overlapping Fibonacci levels, you can see a few levels that have nicely lined up, the main one both coming in at 38.2, there is also 61.8 + 0.0 and 23.6 + 61.8. The 38.2 level has now become a major resistance level.
This type of technical analysis can be great for new traders as it is completely visual and does not need any third-party indicators. I would never trade this strategy by itself but it can be used with other indicators to help find entry and exit levels.
The strategy is in the name where you put two sets of Fibonacci levels onto a chart from two separate candles and see where they overlap to try to find support and resistance levels.
For more information on Fibonacci please click here.
This can be a very simple strategy but you may want to use it in conjuncture with other indicators.