Thread: Corrections

I did backtesting in GBP/USD using Fibo-based corrections and took a surprise: most of the setbacks were between 38% and 50%, but when they didn't get there, the price used to shoot nonstop. Does that mean that when the correction is weak, the impulse goes on? Or is it just coincidence?

I noticed that when a daily candle closes out of a Bollinger band after a big climb, the recoil is almost certain. Could you use that as proof of correction? Has anyone tried combining Bollinger with Fibo?

Sorry, but this whole subject of corrections sounds very nice in theory... until the market decides to ignore them completely. I�ve seen pairs move 400 pips without looking back, breaking all the levels of setbacks there have been and there have been.

I don't know about you, but I use corrections as pro-trend entries, not to go against it. Am I misfocusing my operation or is it also helpful to think of corrections as pro-trend opportunities?

One question: if a correction goes back more than 61.8%, is it no longer correction and becomes a change of trend? I find it hard to define that limit. I feel I am guessing.

I have read about using divergences in RSI to detect the end of an explosive movement and anticipate a correction. Has anyone successfully applied it? Does it work or is it another rookie trap?

The psychological part also intrigues me. Do corrections exist because the market needs to "breath"? I mean, is it just a matter of volume, liquidity and manipulation, or is there something deeper behind it?

I�m starting to look at the corrections as �rests� of the price and not as opportunities to trade against it. Perhaps if I change that approach, I�ll stop getting so frustrated when the market goes against me in the middle of a setback.

I saw some traders trace Fibo from the last swing to the current one, but others do it from the top of the day. Is there a correct shape or depends on the style? Because depending on how you trace it, the entry zone changes completely.

I have succeeded in waiting for correction in Fibo area + support/resistance + turning candle pattern. Does anyone else use that type of �triple confirmation� or am I already complicating it too much?