How to draw Fibonacci retracement on USD/INR chart?

To draw Fibonacci retracement on a USD/INR chart, follow these steps: 1. Open the chart by logging in to your trading learning platform (for example TMGM Demo) and loading the USD/INR currency pair. 2. Select the timeframe. Higher timeframes such as daily or weekly usually provide more reliable support and resistance levels than 15-minute or hourly charts. 3. Access the Fibonacci tool from the drawing tools menu on the side toolbar and select the Fibonacci Retracement tool. 4. Identify a swing high and a swing low. A swing high is a recent peak followed by two consecutive lower highs, and a swing low is a recent trough followed by two consecutive higher lows. 5. In an uptrend, click the swing low (bottom of the move) and drag the cursor up to the swing high (top of the move) to plot Fibonacci levels such as 23.6%, 38.2%, 50% and 61.8%. In a downtrend, click the swing high and drag the cursor down to the swing low. The tool will then show the levels where price might bounce before continuing lower.

What is the origin of the Fibonacci sequence?

The Fibonacci sequence was introduced to Western mathematics by Italian mathematician Leonardo of Pisa, also known as Fibonacci, in his 1202 book 'Liber Abaci'. However, the sequence had already been described in Indian mathematics centuries earlier.

Can Fibonacci retracement be used in all financial markets?

Yes. Fibonacci retracement can be applied to any financial market, including stocks, forex, commodities and cryptocurrencies. It is a versatile tool that works across different asset classes.

How to use Fibonacci retracement as an Indian trader?

To use Fibonacci retracement as an Indian trader, first identify a clear trend and a significant price move with a swing high and swing low. Then use the Fibonacci levels to mark potential pullback zones and confirm these areas with other indicators such as moving averages or RSI before entering a trade. Place stop-loss orders beyond the next Fibonacci level and use the levels to plan potential profit targets while following the regulations that apply to you as an Indian resident.

How accurate is Fibonacci retracement?

Fibonacci retracement can be a useful tool, but it is not 100% accurate. Its effectiveness varies with market conditions and how it is applied. Traders usually use Fibonacci levels together with other technical analysis tools and indicators rather than relying on them alone.

How do I know which Fibonacci level to use for my trade entry or exit?

The choice of Fibonacci level depends on the overall trend, confirmation from other technical indicators and your risk tolerance. Many traders pay close attention to the 61.8% level, often called the golden ratio, but they still consider additional factors such as structure, volume and momentum signals before deciding where to enter or exit a trade.

How does Fibonacci retracement work in ranging markets?

Fibonacci retracement tends to be less effective in ranging markets than in trending markets because price action often oscillates within horizontal support and resistance zones instead of pulling back within a directional move. In range-bound conditions, tools such as support and resistance levels, oscillators and channel analysis are often more useful.

Are there any automated trading systems based on Fibonacci retracement?

Yes. There are automated trading systems and Expert Advisors (EAs) that incorporate Fibonacci retracement rules for entries, exits and position management. However, as with any automated strategy, they should be thoroughly tested, monitored in live conditions and used cautiously with appropriate risk management.

How to Draw Fibonacci Retracement for an Indian Trader?

Q: What is Fibonacci retracement?

Fibonacci retracement is a technical analysis tool that uses horizontal lines to identify potential support and resistance levels for price reversals based on the mathematical Fibonacci sequence. Traders use it to anticipate where a price trend might pause or reverse after a significant move.

What is Fibonacci Retracement?

Figure 1. Chart of a Fibonacci Retracement Tool being used on a forex currency chart.
Fibonacci retracement is a technical analysis tool used by traders to identify potential support and resistance levels. It uses ratios derived from the Fibonacci sequence to help predict where a price may pause or reverse during a pullback in a trend.

Important Fibonacci retracement settings used by professional Fibonacci trader include:

23.6%
38.2%
50% (not a Fibonacci number, but widely used)
61.8%
78.6%

These numbers are visualized on the price chart to identify potential support and resistance levels or supply and demand reversal zones. These ratios are derived from the relationships between numbers in the Fibonacci sequence. The 61.8 percent level is the most well-known because it is connected to the Fibonacci retracement golden ratio, which many traders closely monitor.

How to Draw Fibonacci Retracement for Trading

Drawing Fibonacci Retracement levels is a simple process using the built-in tool on most trading platforms. The key is to correctly identify the start and end points of a significant price move (swing high and swing low).

Note: Fibonacci Retracement finds the support and resistance levels of a particular trend, so this can be used in many scenarios like Day Trading or even Scalping Trading.

Step 1: Identify The Trend

Determine whether the market is an uptrend or a downtrend. This is crucial, as Fibonacci retracement works best in trending markets, hence it is more beginner friendly with swing trading strategy.

Step 2: Select the Fibonacci Retracement Tool

Most charting software provides a specific tool for this (often a 'F' symbol or found in the drawing tools menu).

Step 3: Apply the Fibonacci Tool

For an uptrend:
Click and hold your cursor at the significant swing low (the bottom of the move), then drag it up to the most recent swing high (the peak of the move).

For a downtrend:
Click and hold your cursor at the significant swing high (the top of the move), then drag it down to the most recent swing low (the trough of the move).

Step 4: Watch for Potential Support and Resistance

When the price approaches a Fibonacci level, observe how it behaves. The level can act as support during an uptrend or resistance during a downtrend. These reactions may indicate potential buying or selling opportunities.

Step 5: Combine Fibonacci with Other Tools

Fibonacci is more effective when used with other technical tools. You can combine it with trendlines , moving averages, RSI, or chart patterns. Many traders also use it with Elliott Wave Fibonacci analysis for added clarity.

Step 6: Use Multiple Timeframes

Applying Fibonacci retracement on several timeframes can help identify zones where multiple levels align. These alignments create stronger trading areas.

Step 7: Practice Before Trading Live

Like any trading tool, mastering Fibonacci retracement takes time and practice. Start with paper trading to gain confidence before using it in live trading.

How Indian traders apply this on NSE and USD/INR

Figure 2: USD/INR chart using Fibonacci Retracement to observe price stabilization and reversal, centred around Fibonacci Level or Gold Level at 0.618 level, emphasized by the red arrow.

In trading, the 61.8 percent retracement level is considered the most influential. Many traders observe whether the price reacts around 0.618 level, because the market often finds stability or reverses there.

The above figure shows an example of how Indian Traders drew a Fibonacci Retracement on a USD/INR chart, likely on NSE or any SEBI approved broker.

Notice how the price gets gravitated towards the 0.618 to find both support and resistance. This natural property made Fibonacci extremely useful for traders. Usually, as all support and resistance tools, the longer the timeframe when the tool is drawn on, the stronger the reliability.

Meaning, if you draw a Fibonacci Retracement on the Week Chart to predict support/resistance levels on the Day Chart, it will work very well on the Day Chart.

Common Mistakes Indian Traders Make with Fibonacci Retracement

Fibonacci tools are used by professionals but they still have limitations:

Subjective Analysis
Different traders choose different swing highs and lows. This leads to different retracement levels.

Never a Standalone Tool
Fibonacci retracement should always be combined with other trading tools and strategies to create confluence.

Ignoring Market Characteristics & Conditions
The tool works best in clean trending conditions. Extremely volatile conditions may reduce reliability.

Other Advanced Fibonacci Tools

Besides Fibonacci Retracement, you can explore additional tools that expand your strategy:

Fibonacci Extensions
Used to project potential profit targets beyond the retracement levels using Fibonacci Sequence or Fibonacci Series numbers.

Fibonacci Fans
Lines drawn from a swing high or swing low that create a fan-shaped pattern, helping traders understand angled support or resistance.

Fibonacci Time Zones
Vertical lines based on Fibonacci intervals that may signal possible timing of market reversal.

Fibonacci Clusters
When multiple Fibonacci levels from different swings or timeframes overlap, they create stronger reaction zones.

Elliott Wave Fibonacci
Elliott Wave and Fibonacci analysis are often used together in trading to identify support and resistance levels and potential price targets.

These techniques are also useful in markets like forex, indices, metals, and crypto trading.

Learning and trading Fibonacci Retracement with a Regulated Broker.

Fibonacci Retracement is one of the most popular tools used by traders, hence most brokers provide a powerful trading environment for beginners who want to learn how to draw Fibonacci retracement correctly.

The important thing to remember is that Indian Traders must adhere to SEBI (Securities and Exchange Board of India) regulations and the approved list of exchanges and brokers when trading Forex, Stocks, Commodities or even Crypto.

Before Trading:

SEBI Approved list of Exchanges include:

National Stock Exchange (NSE)
Bombay Stock Exchange (BSE)
Multi Commodity Exchange (MCX)
National Commodity & Derivatives Exchange (NCDEX)
Metropolitan Stock Exchange of India Ltd. (MSEI)
India International Exchange (India INX)

However, TMGM provides a wide range of resources for beginners to learn trading. These valuable resources include:

MetaTrader 4 and 5 Integration

TMGM offers MT4 and MT5 platforms with built-in Fibonacci tools. You can easily apply Fibonacci retracement settings to any chart and learn how to draw fibonacci retracement.

Educational Resources

TMGM offers many other educational materials like blog articles, E-books, Courses, Market News and Webinars that often cover advanced trading techniques, including Fibonacci retracement. Take advantage of these resources to enhance your understanding and application of this tool.

Risk Management

Always apply proper risk management when using any trading methods and strategies. Use the stop-loss and take-profit features to manage your risk.

Demo Account Practice
Before applying any tools in live trading with a SEBI Approved Broker, you can use TMGM's beginner-friendly demo account feature to practice and refine your strategy without risking real capital.

Combining TMGM's professional educational materials with robust demo-trading infrastructure, can enhance your trading strategy and decision-making process. However, always remember that no trading tool is infallible, and it's crucial to use Fibonacci retracement as part of a comprehensive trading plan that includes thorough market analysis and strict risk management.