Can you buy when the volume pulls back to 61.8% of the position of the breaking yang line?

2025/06/30 06:00

Understanding the 61.8% Fibonacci Retracement in Cryptocurrency Trading

In technical analysis, Fibonacci retracement levels are widely used by traders to identify potential support and resistance zones. The 61.8% level is one of the most significant Fibonacci ratios, often referred to as the "golden ratio." When applied to a recent price move—especially after a strong bullish candle known as a breaking yang line—traders look for pullbacks to this level as potential entry points.

The key idea here is that after a strong upward movement (represented by a large bullish candle), the price may retrace part of its gains before continuing in the original direction. Traders often watch for a pullback to the 61.8% Fibonacci level, believing it offers a favorable risk-to-reward entry point.

Important Note:

It's crucial to combine Fibonacci retracements with other indicators or chart patterns to increase the probability of successful trades.

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What Is a Breaking Yang Line?

A breaking yang line refers to a strong bullish candlestick pattern characterized by a large green (or white) candle with minimal upper and lower shadows. This type of candle typically indicates strong buying pressure and often appears at the beginning of a new uptrend or after a consolidation phase.

When such a candle forms, many traders interpret it as a signal that institutional buyers or whales are entering the market. However, after such a powerful move, the price often experiences a pullback or consolidation as traders take profits or hesitate before pushing higher.

Traders who recognize this pattern may wait for the price to retrace to key Fibonacci levels—like the 61.8% retracement of the breaking yang line's range—before entering long positions.

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How to Measure the 61.8% Pullback from the Breaking Yang Line

To determine whether the price has pulled back to the 61.8% retracement level of the breaking yang line, follow these steps:

• Identify the breaking yang line on your chart.
• Note the low and high of that specific candle.
• Use a Fibonacci retracement tool available on most trading platforms (e.g., TradingView, Binance, or MetaTrader).
• Drag the tool from the low of the candle to the high (for an uptrend).
• Confirm that the price touches or closely approaches the 61.8% level during the pullback.

This process helps you visualize where potential support could form and where traders might place buy orders based on Fibonacci theory.

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Why the 61.8% Level Matters in Crypto Markets

Cryptocurrency markets are highly volatile and often influenced by sentiment-driven movements. Because of this, Fibonacci retracement levels act as psychological anchors for traders. The 61.8% retracement is especially respected because it represents a deep correction that still maintains the integrity of the prior trend.

In crypto, when a breaking yang line occurs followed by a pullback to the 61.8% level, it can signal that the bullish momentum remains intact despite short-term profit-taking. Many experienced traders view this as a high-probability setup for entering long positions.

However, it’s essential to validate the strength of the bounce using volume and other confirmation tools like moving averages or RSI.

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Using Volume as Confirmation for Entry

Volume plays a critical role in confirming whether a pullback to the 61.8% Fibonacci level is likely to result in a reversal or continuation of the trend. A healthy pullback should occur on lower-than-average volume, suggesting that selling pressure is waning. Conversely, a strong increase in volume near the 61.8% level can indicate renewed buying interest.

Here’s how to analyze volume effectively:

• Compare current volume bars to the average volume over the past 20 periods.
• Look for a spike in volume at or near the 61.8% retracement level.
• Watch for volume divergence—if the price makes a new low but volume doesn’t confirm it, this can be a sign of weakness in the downtrend.

When the price hits the 61.8% level and volume surges, it can serve as a strong signal to consider going long, assuming other technical indicators align.

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Combining Fibonacci with Other Technical Tools

While Fibonacci retracements are powerful on their own, combining them with other technical indicators increases the likelihood of successful entries. Here are some complementary tools:

• Moving Averages: Check if the price is above key moving averages like the 50 EMA or 200 EMA.
• RSI (Relative Strength Index): Ensure that RSI isn't in oversold or overbought territory unless you're looking for reversals.
• Candlestick Patterns: Look for bullish reversal patterns like hammers, engulfing candles, or morning stars near the 61.8% level.
• Trendlines: Confirm that the pullback respects a rising trendline or channel support.

By layering these tools, you can create a more robust trading strategy around the 61.8% pullback from a breaking yang line.

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Step-by-Step Guide to Entering a Trade Based on This Strategy

• Identify a clear breaking yang line on your chart.
• Apply Fibonacci retracement from the low to the high of that candle.
• Wait for the price to pull back toward the 61.8% level.
• Monitor volume behavior during the pullback.
• Confirm with additional indicators like RSI or moving averages.
• Enter a long position once the price shows signs of bouncing off the 61.8% level.
• Place a stop-loss just below the 78.6% Fibonacci level or recent swing low.
• Set a take-profit target at the previous high or use a trailing stop to maximize gains.

Each step should be executed carefully to avoid false signals and ensure proper risk management.

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Frequently Asked Questions

Q: Can I use this strategy on any cryptocurrency pair?

Yes, this strategy can be applied across various cryptocurrency pairs, including BTC/USDT, ETH/USDT, and altcoin pairs. However, it works best on liquid markets with sufficient volume.

Q: What timeframes are ideal for applying this method?

This approach is effective on multiple timeframes, but daily and 4-hour charts are preferred for better accuracy and fewer false signals.

Q: Should I always wait for the price to hit exactly 61.8%, or can I enter slightly before?

Ideally, wait for the price to reach or closely approach the 61.8% level. Entering too early may expose you to deeper corrections and increased risk.

Q: How reliable is the 61.8% Fibonacci level compared to other retracement levels?

The 61.8% level is considered one of the strongest Fibonacci levels due to its connection with the golden ratio. It tends to provide more reliable support/resistance than less commonly watched levels like 50% or 76.4%.