Fibonacci Regression - The problem with traditional drawing

In the EURUSD chart below, if you want to determine the regression point of wave 1 -> 2, how would you draw?


Pull the Fibonacci regression from top 1 to bottom 2, right? Too simple! The result is sure that the nearest swing high will have to be in a Fibonacci zone.


Trouble, brother! The price has not reached the 61.8% Fibonacci retracement area, but it has reversed and decreased. Saying the price reversal at the 50% Fibonacci is also wrong because we can see that there has been a clear break of the 50% zone.

The problem with traditional drawing is that it GOES EXPANSION AND CONTRACTION of the market. The market always moves in terms of expansion and contraction, not in a linear fashion. In the down wave of 1-2, there was an expansion in the downward direction, the traditional drawing only considered the price range 1-2 as a normal move from point 1 to point 2, but the reality is that must be EXPANDED DOWN from point 1 to point 2.

So how to draw correctly?

Fibonacci Regression - How to draw Fibonacci Regression accurately

Quite simply, you just need to take into account the expansion in the 1-2 wave by STARTING WITH THE EXPANSION TREE.

The open candle is the starting candle for that bearish segment, not the top candle of the previous price segment. Open candles must satisfy the following criteria:
  • The beginning of the wave of decrease/increase and expansion of the market
  • Candle with the large body (pin bar, Doji excluded)


Thus, the open candle in the down wave from 1-2 must be the candle to the right of the candle with peak 1. So to draw correctly, we only need to stretch the Fibonacci retracement from the top of the next candle, ie stretch. Fibonacci from top 1 'to bottom 2.

Result:


Price reversed exactly at the 61.8% Fibonacci retracement area. Oh hi, ka!

Fibonacci Regression - Many other examples

This is no coincidence. You just try it.

The traditional Fibonacci retracement wave of the downside wave of GBPUSD goes from top 1 to bottom 2, we have a slight deviation:


Instead, we stretch from the top of the candle that initiates the down wave and is the big candle, that is, from the 1 'high to the bottom 2. Perfect precision:


Similarly, with AUDUSD, the traditional draw for deviations:


A new drawing method (stretching from top 1 'to bottom 2), gives the correct results:


BNB USDT stretched from bottom 1 to top 2:


BCHUSD stretched from bottom 1 to top 2: