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Fibonacci Guidlines
Student's Comment:
I can trade this 2 ways. I would watch the retracement as it approaches the different FIB lines. As the price either bounces or trades through the FIB lines I can trade it either way. But I would say the 61.8 is the strongest of the three as there is quite a bit of congestion at that level to the left.
Instructor's Response:
While you mentioned that you can trade this USDJPY pair two ways, keep in mind that since the pair is in a downtrend on this Daily chart, the higher probability trades will be in that direction as opposed to buying opportunities.
While the Fib line that you drew is correct, it goes back to April. Using those levels, there would likely be a considerable wait for a retracement of 500 pips to the 38.2 level and over 800 pips to the 61.8 level.
Consider either Fib line 1 or 2. Both of them are valid as well but would necessitate a far lesser retracement. Put those Fib lines on a Daily chart and see how they play out.
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