Price Swings

Now that you know the Fibonacci ratios that I use, we need to discuss the methodology of finding price swings on a chart. A price swing nothing more than a set of low - high - low or high - low - high prices. The following is a chart of the e-mini Dow futures. You can see that there is a lot of "vibration" in price.

To simplify the process of finding the "best" swings, I add a moving average to the chart. Specifically, a 50 period simple moving average (SMA). On my charts, this moving average is always Magenta (pinkish), as follows: 

Next, I look for areas where price has created a meaningful "window" (white space) between the candle and the 50MA. Every trader will determine the appropriate window size for the product(s) and timeframe(s) that they trade. The following picture, highlights in yellow, the windows that correspond with the price swings (extremes) that might prove significant in determining the direction of price:

While it might look messy, measuring each of these extremes with a Fibonacci retracement tool creates a chart that looks as follows: