Truly professional traders know that it is their responsibility to trade with the best and most useful tools possible in order to achieve the best results. This may sound simplistic, but there are far too many amateur traders leaving a lot on the table because they don’t use tools that are easily available to them. One of those tools is to use a Japanese candlestick chart with their Fibonacci retracement charts to determine where the best prices are for a support or resistance trade.

When looking at trends, the Japanese candlesticks are the way to go. They show you the opening price, the high price, the low price, and the end price for a certain time period. If you are looking at the one-hour chart for example, then each candle will show you all of those prices for the entire hour that the candle was open. This might give you a much better sense of the momentum of a currency pair at any given time. At the very least, it is a major improvement compared to just looking at the line graph for the currency pair.

Spot a trend that you think you might want to jump on? Great! Now get the Fibonacci tool at the ready and start drawing some retracement lines from the spot where you believe the currency pair is going to make its move. If you turn out to be right, then you are going to be very pleased that you took the time to work out where you thought retracements were likely to occur. If you are wrong, then at least you will have a data point from which you can base future trades.

Ultimately, by combining your knowledge of Fibonacci retracements and candlestick patterns, you get key clues as to price action movement. See below for an example:

The reason to combine Japanese candlesticks with your Fibonacci tool is that they simply provide so much more information than you could ever get from any other type of data. You will see so much more clearly how the pair is moving and what it has done in the past. The shape of some of those candles can also be instructive as far as figuring out if the movements are likely to continue in the direction they have already been going or not. You might take the shape of those candles into consideration as you decide if now is the time to pull the trigger on your latest trade or not. It is certainly not an easy choice for a lot of people, but at least you can come to the table with all of the possible information available at your disposal.

Keep in mind that Fibonacci lines are a great thing to use to try to pick a spot where resistance or support is likely to consolidate, but you don’t want to rely on these lines as your only indicator of where the pair is moving. You will want to combine those Fib lines with other telling indicators to find some confirmation that the direction you believe the pair is headed is actually likely to come to pass. Nothing will tell you the true story of how the pair will move until the pair actually starts to move, but it is a lot better to have this information than to not. Make sure you set up your trades with as many useful data points as possible without overwhelming yourself. In the Forex market, knowledge is power.