The purpose of this post is to review a couple of charts with and without Fibonacci lines so that traders can get a better understanding of the usefulness of Fibonacci as a trading tool. The first chart is the 15 minute BTU with support/resistance gap openings and congestion zones mapped out. The second chart is the same BTU chart with the Fibonacci retracement and extensions added. The trade in question was Thursday December 4th. Susan shorted on a break of the coiled spring (price/vol. contraction), partialed at the 50% level and closed at the ORL which lines up with 62% Fib. level. She re-entered after price consolidated at the PDL (previous day low) and exit at the 50% Fib. extension level. The key take away here is that if the Fibonacci lines are drawn as per Trader-X guidelines (#1) in this setup, the Fibonacci retracement zones (38%-62%) correspond to key S/R, congestion areas. Those are areas where price could typically find support and consolidate or retrace. If you're trading in the retracement zone, you have to manage the trade closely. Once price moves away from the retracement zone, and assuming the setup is good, it is more likely to move to the next level because there's nothing in the way. Fibonacci lines are a mathematical tool to help traders with entries and exits. It's much easier to map out Fibonacci lines than all of the actual S/R, gaps and congestion zones. The math, which is not my forte, has an uncanny way of lining up with the key spots. In addition to the guidelines set out by Trader-X, I have a few of my own. Long time readers know that when I trade chart patterns, I like to place Fib. extension lines from the high/low of the pattern to the base. For example on a C&H, I extend from the low of the cup to the base of the handle and target 100% extension. That's based on textbook measured moves of chart patterns. The chart below of ABX (TSX) is a 3 PP base - box play. In this type of setup, I prefer to place my Fib. lines from previous day high to the pivot point base rather than the ORL. Why? Because the base has been forming over several days and is thus more significant than the open. Here again I've mapped out the real S/R zones and Fibonacci. They're almost identical. I traded ABX on Friday as depicted below. On the first test of the R-zone, it held as resistance and price moved to the 100% extension. I had planned to short again if and when it broke out of the retracement zone to the downside around 2:30, but that didn't happen and I moved on to something else.