Choosing the impulse before you draw a Fib

Fibonacci ratios only mean something when the move you measure is a genuine impulse. Traders in our evenings often draw first and justify later. Flip that order.

Three questions before the tool

1. Did price travel with consecutive closes in one direction? A single spike rarely qualifies.
2. Did the move break a prior swing? If not, you may be measuring a pullback inside a larger trend.
3. Would a peer name the same start and end without prompting? Ambiguity is a signal to wait.

A Sydney example

On a recent CBA daily chart, several participants anchored Fibs from an intraday wick that never closed near the extreme. Rebuilding from the first daily close beyond the prior swing high shifted the 50% level by more than a dollar — enough to change whether a later bounce counted as “respect.”

Practice drill

Open last month’s chart on an instrument you trade. Cover the Fib tool. Mark the impulse with two horizontal lines only. Uncover the tool and draw. If the anchors disagree with your lines, trust the lines.