Fibo Questions

Can someone explain what Fib Confluence and Fib Retraction is? I'm having trouble getting a grasp on this subject.

I understand Fib Retraction is when price pulls back to a fib line, but is it any fib line or the closest fib line that it retracts too?

As for Fib confluence, I'm lost....

Fib confluence is when two or more fib levels line up. Say you map fibs over a large downtrend and a smaller one. There are times when the 61.8 level of the smaller lines up with the 50.0 of the larger. That would be an area of fib confluence. I'm on my cell but if you search, I made a trading journal in which I showed some confluences on a chart I believe.

Idk about fib 'retraction'. A Fib 'retracement' is when price retraces back to a fib level. It can be any level. In a strong trend it may only retrace to 38.2. Usually 50 is a strong point though.

Btw, always draw Fibs in the direction price is going. Its a common rookie mistake to draw them backwards. Ie price has been going up so start your fib at the bottom and go up. The 100 line should be where price started.

Hope that helps!

The main issue I have with fibo is trying to figure out which swing low in an uptrend or swing high in a downtrend to use to anchor the fibo lines. How far back do I have to go ? Or do I use the nearest swing point ?
Or is it better to draw several fibo lines and select the level with confluence ?

Fibonanci confluence area is where the fibonanci retracement meet the fibonanci extention. Fibonanci confluence area is one of the best entry point in all investing instrument such as forex, commodities, stock etc

Fibonanci retracement is to determine where the targeted pull back area, usually to determine where the price stop and ready to make the move.
Fibonanci extention is to determine where the price will move and stop after doing retracement. Usually use to determine the Target Profit.

When they meet together, it is the confluence area.

Also.. check out Gartley, Butterfly, Bat, 3-drive, ect patterns. They all use fib confluences.

I have just watched a tutorial videos that highlighted the value of fib levels in confluence with old highs or lows and/or pivot points.

Apparently, these areas feature strong potential for price to bounce off and may signal the end of a retracement in a trend.

Probably the best book and source on Fibonacci is Constance Brown's book. Having said that, Fibonacci is really a subjective method of trading. To be successful, enough traders trading the same time frame and the same currency have to have drawn their Fibonacci ratios in the same place and decide to react at the same time. When a price pair rebounds of a Fibonacci retracement level it is pure coincidence. If you consider Richard Olsen's reflection on the market, it only takes $5 million to create a spike in the EURUSD. This could be done by a variety of traders with hedge funds. Yes, they may be using Fibonacci to decide when to trade or not but more likely, traders of this size are making decisions on fundamental issues on charts.