Showing posts with label fibonacci strategies. Show all posts
Showing posts with label fibonacci strategies. Show all posts

Fibonacci Tools & Strategies.

Fibonacci is one of the most powerful tool for trading. There are many fibonacci tools in trading platforms: Retracement, Expansion, Fibonacci Fan, Fibonacci Arcs and Fibonacci Times Zone.

The beauty of this toll is that work in every markets conditions and on every TF. Ofcourse like all trading strategies, works better on higher TF.

Before I'll start to tell you about strategies using these tools, I want to make sure you will use correctly Fibonacci Retracement:

1. Always draw this tool in the direction of the trend ( we want to see how much the PA will retrace, before continue the main trend - we want to know the possible end of the counter trend ).
2. If trend is short, click top, drag while keep pressing click, until bottom and release click.
3. If trend is long, click bottom , drag while keep pressing click, until top and release click.

Now the chart should look like this:

The HH level used for drawing is not actually HH, but it's a previous High ( LH ). You can use only the previous swing's High for measurements. 

For the importance of Fibonacci you might wanna look this article too: Fibonacci Retracement.

1. Fibonacci Retracement + TL BO.

This is one of the most used strategy using fibonacci retracement. But before we continue, you must look at TL BO Strategies.

Drawing a TL ( on counter trend ) offer us a great entry possibility to enter the market when:

1. PA failed to BO the 61.8% fibonacci retracement level ( golden ration ).
2. BO of the TL
3. Tight SL, previous High, before BO occur ( or 61.8% fib level + spread + 5 pips ).
4. TP is 0.0% fibonacci retracement level ( the start of the counter trend - here PA is possible to fail to break further )

2. Pending Orders on Fibonacci Retracement Levels.

 This is one of the most profitable fibonacci strategy because you always trade with this in the direction of the trend only. ( "the trend is your friend " ).
For this, we will use same example as the previous strategy chart. This strategy works better from H1 to Weekly chart.

1. Draw the fibonacci retracement from top to bottom ( since our chart has main trend short ).
2. Put pending Sell Limit Orders on 32.8%, 50% and 61.8% ( we expect PA will return to short trend at one of those levels ).
3. As SL use 61.8% or 78.6% level ( if PA BO the 61.8% from the big main swing, we might have a change of the trend, from short, to long, in our example ).
4. For our first TP, we will have 0.0% level ( or the LL - we expect this to be BO or rejection from it, when PA will fall down )
5. For the next 2 levels of TP, we can use Fibonacci Expansion. 100% and 161.8% ( drawn same as retracement tool - click top, drag bottom, then click and adjust the retracement line to the correction end - near 50% retracement level, in our example - the red dotted line ).

At this strategy you might wanna consider this:
a) If only 1 pending order hit ( first 32.8% ) and PA follow the main trend down, delete the other 2 pending orders. As TP use TP 3. ( 161.8% - expansion tool red ). If counter trend was so weak to touch only this level, that means stronger main trend down coming ).
b) If 2 pending orders were hit ( 32.8% and 50% ) delete the 61.8% pending and as TP you can use TP 1 for 50 %, TP 2 for 32.8%.
c) If all 3 pending orders were hit, you can use TP 1 for 61.8%, TP 2 for 50% and TP 3 for 32.8%.
d. Also you can use Trailing Stop or move SL manually after each BO, to the previous HL until BE.

3. Fibonacci Retracement on multi Time Frames.

Another profitable way of trading fibonacci is to draw it on a higher time frame and look for entry on lower TF. For example draw fibonacci on Daily chart and look for entries on H1.
For this you need all fibonacci levels for retracement added in the "Properties". To go there, use this way. Here you should have all those levels: 23.6%, 38.2%, 50%, 61.8%, 70.7%, 78.6%.

1. Draw Fibonacci Retracement on Daily chart ( same as previous example ).
2. Lower the TF to H1 and look trades on every level ( buy counter trend or sell correction over ) like Trend Lines Strategies or Support/Resistance Lines Strategies. Careful attention on 32.8%, 50% and 61.8%. In those area correction should end. In case correction is only 32.8% a fast down trend usually occur.
3. TP = next level / opposite TL BO / Trailing Stop.
4. SL = next level / opposite TL BO / Move SL manually on previous HH/LL.

Best Regards,