What is a Commodities Retracement Strategy?
How Do I Use Commodity Trading Fibonacci in Commodities?
A good commodity retracement strategy to use is the fibonacci retracement indicator. Fibonacci retracement indicator is used by many commodity traders as a commodity retracement strategy trading indicator.
The fibonacci retracement indicator is placed on a commodity chart and this Commodities Trading Fibonacci Retracement indicator then calculates the retracement levels on the commodities charts.
Commodities Trading Fib Retracement Strategy Examples on Upward Commodities Trend and Downward Commodity Trend
How to Trade Retracement on Upward Commodities Trend
In the Commodities Retracement Strategy example illustrated and explained below the commodities price is moving up between chart point 1 & chart point 2 then after chart point 2 it retraces down to 50.0% retracement level then commodities price continues moving up in the original upward commodities trend. Note that this commodity retracement technical indicator is drawn from point 1 to point 2 in direction of the commodities trading trend (Upwards Direction).
Because we know this is just a retracement based on our commodity chart commodity trend - using this retracement indicator, we put a buy order just between the levels 38.2% and 50.0% & our stoploss just below 61.8% pull back mark. If you had put a buy at this point in trade example illustrated and explained below you would have made a lot of pips after the commodities price retracement reached the Fibonacci 50.0% level and then continued moving in the original upward commodities trend.
How to Trade Retracement on Upward Commodities Trend - Commodities Retracement Strategy
Explanation for the Above Commodity Retracement Strategy Example
Once the commodities price hit the 50.00% retracement level, this retracement level provided a lot of support for the commodities price, and afterward commodity market then resumed the original upwards commodity trend & continued to move up.
23.60% retracement level provides minimum support & isn't an ideal place to set a commodities trade order.
38.20% retracement level provides some support but commodities price in this example continued to retrace up to the 50% zone.
50.00% retracement level provides a lot of support & in this example, this was the ideal place to set a buy commodities trade order.
For this Commodities Retracement Strategy example, the commodities price retracement reached the 50.0% retracement level, but most of the time the commodity market will retrace up to 38.2% retracement level and therefore most of the time commodity traders set their buy limit commodity orders at the 38.2% Fibonacci retracement level, while at the same time placing a stop just below 61.8% Fibonacci retracement level.
How to Trade Retracement on Downwards Commodities Trend
In the Commodities Retracement Strategy example illustrated and explained below the commodity market is moving downwards between chart point 1 and chart point 2, then after chart point 2 the commodities price then retraces up to 38.20% retracement level then it continues heading downwards in the original downward commodities trend. Note that this commodity retracement technical indicator is drawn from point 1 to point 2 in direction of the commodities trading trend (Downwards Direction).
Because we know this is just a retracement based on the commodities chart commodity trend we put a sell order at 38.2% retracement level and a stop loss just above 61.8% retracement level.
If you had put sell order at the 38.2% retracement level as shown on the trade below you would have made a lot of pips afterwards after the commodities price reached the 38.2% retracement level and then resumed the downward commodities trend.
In this trade the retracement of commodities price reached 38.2% retracement level & did not get to 50.00% retracement level. It is always good to use 38.20% retracement level because most times the commodities price retracement does not always get to 50.0% retracement level.
How to Trade Retracement on Downwards Commodities Trend - Commodities Retracement Strategy
Explanation for the Above Commodity Retracement Strategy Example
The above Commodities Retracement Strategy example is a commodity retracement trading setup where the commodities price retraces immediately after touching the 38.2% Commodities Trading Fibonacci Retracement Level.
This Commodities Retracement level provided a lot of resistance for the commodities price retracement, this was the best place for a trader to set a sell limit commodity order as the commodity market quickly moved down after hitting this retracement level.
