The charts below show sample trades using the Fibonacci retracement. GBP/USD was going on an up-trend from November 2003.

During an up-trend, traders would look for pullback and buy in. In January 2004, GBP/USD reached its first top at 1.8580 and started pullback.

The pullback was until 1.7820 which was the 38.2% retracement of the up-trend. A bullish engulfing pattern at the 38.2% retracement level confirmed the pullback.

The trend resumed its upward momentum and reached 1.9140 in Feburary.

After reaching the historical high at 1.9140, GBP/USD reversed its direction and started a downtrend in February 2004. It reached 1.7905 as an intermediate bottom. The price then rebounced. Traders would look for sell at rebounce. The price rebounced twice up to 50% retracement of the downtrend and they were confirmed by bearish engulfing pattern of the candlesticks.

Note that Fibonacci retracements can be use in both bullish (up-trend) and bearish (down-trend) markets. Traders should look for retracement levels and use them with candlestick patterns to confirm the trades.