Let’s talk about the concept. Why do we use Fibonacci? What is the meaning of retracement? What is the meaning of Fibonacci and retracement? So it is okay, Fibonacci, you understand that he was a great man who gave you these numbers, ratios and said that they are natural. So the whole nature follows this Fibonacci ratio. So you can say that these ratios are followed in the stock market and we know what we know from this.
We know that when the prices taking action in the market, then the support and resistance zones, which are important zones, which you can say that the price can react on those levels. So you get important support and resistance from Fibonacci. This was the concept number one. Concept number two, what is retracement? What happens in this is that the price always goes in the trend. So if the uptrend is going on, then the market will not go like this.
So you know that if the uptrend is also going on, then the price will go up, then it will be retraced. Thesis called retracing. No wit will go up again, then it will be retraced, then it will group again, then it will be retraced, then it will go up, then it will be uptrend, but how much will be retraced? So whenever there is a question, it is important to know the solution to that question. How much will be retraced? Either we calculate it ourselves with support resistance that what is the level of important support.
So here we will try to identify support from Fibonacci’s retracement when the uptrend is going on and when the downtrend is going on, then the price will also happen that the price will fall down and then it will rise. This rising is called retracement. After that it will fall again, then it will rise again, then it will fall again, then it will rise again and this is how the downtrend happens. So this is the uptrend and this is the downtrend. We have to identify what is the retracement in both.
What will we get from this? What is the benefit? Itis important to tell the benefit. So if the price is going in the uptrend and it is retraced, then assume that you were very good stock and you could not buy it in the starting. You want to buy again, so when it will be retraced, you can buy it again. There is a buying opportunity and after that the price goes up. It will get resistance again. The price will be retraced below. How much will be retraced? We try to find out from Fibonacci.
We will know the important levels. Similarly, if the price is falling, you are trading, so you have shorted your position. So if you have shorted, then it fell. You are seeing that it fell. You want to take entry again. You have missed the entry first. You know how much will be retraced. After that the price starts to fall. You take entry again and boom. So this is what we have to understand.
So whenever there is a question, a curiosity comes, then there is a solution to it. Now, curiosity was our retracement and we will learn retracement from Fibonacci retracement and when you use this software, you log in to your Demit account, then what do you see? You will open charts. You can open any chart. I will show you by doing it. Before showing Fibonacci, a question comes from a beginner. There are tools here. You can see here. First of all, Fibonacci retracement.
This Fib is visible. This is Fibonacci. Sir, if you put it from top to bottom or from bottom to top, how do you put it? People get confused on this. Where to you put it? It becomes question. What will happen to it? What does it mean? So let’s explain it to you. Basically, you have to answer a very simple question of mine and then I will tell you everything. So let’s remove this for a minute. I will just remove this for you. So you have to answer very simple question. If the downtrend is going on, where will the price go? It will go down from above. So how will Fibonacci be plotted?
Will you take Fibonacci from top? From above, that is, we will take the high from the shadow here, which was our highland we will take a low here. Suppose this and we left it. It has to be left here. So you clicked twice, so you got this. This is not important for you. What is important, I will show you that. So when the price is going down from above, so you had a high. You brought it from high to low. So you brought the price from high to low. I have brought it exactly. So from high to low and if your uptrend is going on, then from below to above, that is it. So how to apply Fibonacci?
When the downtrend will be from top to bottom, so you need a high and you need a low. Okay, when? This is a very big time period. Suppose have put it here. Why did I put it? I want to tell you that suppose the live market is going on. The market has closed now, but if the market was going on live, I have opened the chart of Nifty here. So if the live market is going on, you are looking at this time and at this time you want to trade. So what are you looking at?
The downtrend is going on. This is being confirmed. Why is it being confirmed? Because after high, lower high is being made and then lower high is being made. Okay, so you have a lower high after lower high and here the price has got support. So you have high, a low and the price was falling. The price was falling. You were getting a lot of red candles. So what did you understand that the price is falling. You can see that the price is in its downtrend. Will it keep falling in the downtrend?
The answer is no. It will rise a little, then it will fall, rise and fall. It is like this. We did not understand it now. So how much will rise? So now what you see is, suppose I have plotted for you that you were trading in the live market. You saw that the price was falling from top to bottom and here you got support. Now the price will rise. How much will rise? You plotted Fibonacci. So you can clearly see that the levels here, you can see 0, 0.236, so this is the percentage. These are called golden ratio.
So 0.236 means 23.6%, 0.382 means 38.2%, 0.5 means 50%, 0.618 means 61.8%, 0.786, so what you are seeing 786, 786, this is 78.6% and then100%. So now what we have to see here, if the price starts rising from its support, from its low, then first it will get rejection. For that, the resistance is 0.236 means 23.6%. If it breaks its resistance, then it will reach the next resistance.
That is 0.382 and you see it has reacted on 382.The green candle has reacted. The next candle starts falling from 382. Correct. Now what you saw, the price was up, it fell down, rose up. Now it started falling down again, it got rejection from 38.2% near your level. It could not reach50%. As soon as it starts falling and it breaks 23.6%, you are confirmed that it will reach the support from where it started rising. It starts rising again on support, it gets rejection again at the level of 23.6% and when it breaks, then you see that the price is going down.
So you had to enter. How did you find out about retracing in the entry? You found out from Fibonacci that these are important levels. Generally, the stocks that you will see, they try to retrace from the level of 50%. Now take the example offering or ITC or whichever stock you trade, then everywhere what you can see, you can check that you can plot Fibonacci on the level of 50%. So now let’s take the example of Reins and you see here. Now you can see that the price is falling continuously.
Now suppose you were doing live trading at that time, you took Fibonacci, you saw that this is the highland at one time you saw that this low has come to me. So from here, from this high, I will plot it on a low. So we took a Fibonacci level. Now what you are seeing is that the price has started falling.
I twill get resistance by 23.6% here. So the resistance is found around those levels. The price has started falling and after falling, when it breaks its baseline, the price goes down. Now when it goes down, it can retrace again. Similarly, whether you trade in HDFC bank or you trade in Bank Nifty, so we have just taken the example of up and down. Now we take an example of down and up.
Now you have an example here. We are looking at the5-minute time frame. So the bigger the time frame you will do Fibonacci, the better for you. So now you are seeing that the price is going up. If the price is going up, then it is an uptrend. So where will we plot Fibonacci? We are up from below. Now we have this low and this is high and we want to see how much the price will go down to go up again.
Sowed start from low. See how much it will go down before it rises again. So if the price starts to fall, then the first important level was23.6%. He broke it, then 38.2%, broke it too. Then you see that the price has reacted around 50% levels. Okay, the important level that was here for This was our high. So we took high from low. So now I have toes, 0.618% did not reach there. As soon as he started rising, he crossed the 50% level. Now what can you say, the prices in its uptrend from here again, it will go up. So the price comes from 50% to 38.2%, then it reacts at the level of 23% and then boom. Then if it comes down, then what did you react?
You reacted around the Fibonacci number, 23.76% and the price goes up. So in the uptrend, when you plotted Fibonacci, you did it from below. From which you found out that the retrace can be at which level. Now one important thing is that if it crosses78.6, this number, then the trend has changed. You do not get the trend and similarly, itis also in the downtrend. If it breaks the level of 78.6, then there is no retracement from here, the trend has changed.
So you just had to understand this from the retracement of Fibonacci. What did you find out from this? When the price was in its uptrend, then important support levels were found. When the price was in its downtrend, then important resistance levels were found. That is, it. So in the examples we have taken so far, I have tried to tell you that let’s say the market is running live. So if the live market is running, then we have taken a high and we have taken a potential that by chance you have a low and the market has made a low till there. After that, no other low has been made.
But when you do the analysis in the future and now let’s say the market is closed in front of you, so now you have a high and you have a low. So the highest point and the lowest point in that time frame you have to take that for Fibonacci when you want to do the analysis in the future. For example, here we have connected the highest and lowest point. So the reason we connected the highest and lowest point was that we have connected the highest point and the lowest point in that time frame so that we can do the analysis in the future.
Now how will we find out how far the price can go after this, how will we find out the potential resistance levels because we have taken Fibonacci here and we have also seen that the last swing was also at 38.2% levels and got rejection. Then the price went down to support and after that it got resistance at similar levels and now the price goes down again. If it breaks from here, then we can understand that the downtrend continues and the price will go down further.
So whenever you trade, at that time frame, you connect the highest point and the lowest point. Whenever you trade, you will see the retracement level of Fibonacci. I will suggest you to watch PCR. So for PCR, you can use the auto render software. I will show you the auto render here. I have shown nit before, it is an important software. If you see that it isles than 1, then the chances of the price going downs