Fibonacci Trading - How To Use Fibonacci in Forex Trading

2/25/2016
FibonacciTradingHowToUseFibonacciinForexTrading
FibonacciTradingHowToUseFibonacciinForex
Trading
Fibonaccitradingisbecomingmoreandmorepopular,becauseitworksandForexandstock
marketsreacttoFibonaccinumbersandlevels.
FibonacciisthesequenceofnumbersdiscoveredbyLeonardoFibonacci,anItalianmathematician:
0,1,2,3,5,8,13,21,34,55,89,144,233,377,610,987,1597,2584,4181,6765,10946,17711,
28657,46368,75025,121393.
Fibonaccinumbersarestartedby0,followedby1,andthenthethirdnumberiscalculatedthrough
adding0+1(thefirstandthesecondnumber).Thenforgettingtheforthnumber(3),thesecondand
thirdnumbersshouldbeadded(1+2)and.
Itwaseasysofar,wasntit?
Nowifyoumeasuretheratioofeachnumbertothenextone,youwillhavetheFibonacciRatiosthat
arethesamenumbers(levels)weuseinourForexorstockmarkettechnicalanalysis:0.236,0.382,
0.500,0.618,0.764.
Tousethesenumbersintechnicalanalysisyoudonthavetomakeanycalculationsandyoudont
evenhavetomemorizethem,becausealltradingplatformsallowyoutodrawtheFibonaccilevels
andtheyhaveeverythingreadytouse.
TheonlythingyoushouldknowishowtousetheFibonaccilevelsinthetechnicalanalysis.
Fibonaccitradingmeanstoknowwhenandwheremarketreversesorkeepsonmoving.Themost
importantthinginFibonaccitradingisthattheFibonaccilevelsactassupportandresistance.When
thepricegoesup,theyactasresistancelevelsandvisaversa.Alsolikeregularsupportand
resistanceline,whenaFibonaccilevelisbrokenasaresistance,itcanactasasupportandbe
retested.ItisthesameaswhenaFibonaccilevelbecomesbrokenasasupport(itcanactasa
resistancethen).
WhydoFibonaccilevelsworkinforexandstockmarket?
WhatistherelationshipbetweenthecurrenciespricesandFibonaccinumbers?
Theansweriswedontknow.TheonlythingweknowisthatFibonaccinumbersworkin
everythingfromthemicroscopicmaterialslikeDNAmoleculetothedistancebetweenoureyes,ears,
hands,eventhedistanceoftheplanetsinthesolarsystemandthewaytheymoveinthespace,
eventhedistanceandpathwayofthestarsintheuniverseandfinallyincurrenciespricesandthe
waytheymoveupanddown.Fibonaccinumberscanbefoundineverythingintheworld.
http://www.fxkeys.com/howtousefibonaccinumbersinforexandstocktrading/
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IdontknowwhyFibonaccinumbersandnotanyothernumber?ButIdoknowwhythesame
numberscanbefoundineverything:Thesamenumberscanbefoundineverything,because
everythingiscreatedbythesamecreator.
IthinkyouhavealreadyseenthebelowpaintingbyLeonardoDaVinci(heisanotherItalianscientist
andphysician).IfyoudrawFibonaccilevelsonit(asIdid)youwillseehowFibonaccinumbers
speciallythe0.618works.Theysay0.618ratiocanbeseenineverythinginourbodyininternaland
externalorgans.
Note:YourchartingplatformcannotdrawFibonaccilevelsonyourface.Donottryit!
HowFibonacciNumbersCanBeUsedinForexTrading?
Fibonaccitradingisnotcomplicated.ByusingtheFibonaccinumbersonthecharts,youcanfind
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moresupportsandresistances.Itwillbeabighelptochoosetherightdirectionandavoid
takingwrongpositions.
TousetheFibonaccinumbersonthecharts,youhavetofindthetopandthebottomoftheprevious
trend.Whentheprevioustrendisadowntrend,youdrawtheFibonaccilevelsfromtoptothebottom
andextendthelinesinthewaythattheycoverthenextcompletingandongoingtrend.Whenthe
previoustrendisanuptrend,youdrawtheFibonaccilevelsfrombottomtotopandextendthelinesin
thewaythattheycoverthenextcompletingtrend.
>>>Youhavetowaitforthetrendtobecomematured:YoucannotdrawtheFibonaccilevels
whilethetrendisnotmatured.Whenyoucannotfindacompletedtrendinatimeframe,youhaveto
lookforoneinasmallerorbiggertimeframeinthesamecurrencypairorstock.
Forexample,onthebelowchartIdrewtheFibonaccilevelsfromthebeginningofanuptrendthat
wasstartedon16Aug2007totheendofitthatwason23Nov2007.Idrewthelevelsfrombottom
totop.
NowletsseehowFibonaccilevelsworkedassupportandresistanceinthenexttrend.
Followtherednumbersonthebelowchart:
1.Thepricethatstartedtogodownon23Nov2007,touchedthe23.60%levelon5Dec2007.This
levelworkedasasupportandsothepricewentupassoonasittouchedthelevelbutthenwent
downtoretestthe23.60%level.
Asyouknow,usuallywhenthepricecannotbreakasupportorresistance,ittriestoretestlaterand
sometimesitcanbreakthemafterretesting.
2.Sothepricewentup,buttriedtoretestthe23.60%leveleightdayslateron14Dec2007and
succeededtobreakthe23.60%levelthistimeandsowentdown.
3.Thepricetouchedthe38.20%levelon17Dec2007andtriedtobreakitforfivedays,butfailed
andsostartedtogoupon23Dec2007.Ittouchedthe23.60%levelwhenitwasgoingupandcould
breakitwithoutanyproblemon27Dec2007.
4.On31Dec2007itwentdowntotestthe23.60%asasupport.On2Jan2008itfailedandwent
up.
5.Currently(17Jan2008)itisretestingthe23.60%levelonceagainasasupportandifthistimeit
breaksthe23.60%level,itwillgodownandifnot,itwillgoup.
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Letslookatanotherexample.Followtherednumbersonthebelowchart:
TherewasabigdowntrendintheGBP/JPYthatstartedon22July2007andendedon17Aug2007.
SoIdrewtheFibonaccilevelsfromthetoptothebottom(from22July2007to17Aug2007).
1.Whilegoingup,thepricetouchedthe23.60%levelon20Aug2007andcouldbreakiteasily,but
onthenextdayitwentdowntoretestthe23.60%levelasasupport.Itcouldnotbebrokenandso
thepricewentup.
2.Thepricedidntshowanyreactiontothe38.20%levelasaresistanceandwentup,butwas
stoppedbythe50%on26Aug2007.From26Augto1Oct2007,pricewentupanddownbetween
the23.60%and50%levels.Duringthisperiodoftime,the38.20%levelworkedassupportand
resistanceseveraltimesanditseemedthatthepricewasrotatingaroundthe38.20%level.Itmadea
consolidationaroundthe38.20%level.
3.The50%levelwasbrokenfinallyon1Oct2007andthepricewentup.
4.Ithadahardtimeinbreakingthe61.80%.Ittriedfortendaysfrom5to16Oct2007tobreakthe
61.80%level,butfailedandbounceddown.
5.Whilegoingdown,itpassedthroughthe50%levelwithoutanyproblem,butwasstoppedbythe
38.20%levelthatactedassupporton22Oct2007.Itwentupon23Oct,testedthe50%level,went
downon24Octandthentestedthe50%on29Octandcouldbreakitup.
6.On31Oct2007,itreachedthe61.80%onceagainandtriedforseveraldaysbutfailedagain,
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wentdownandmadeadoubletop.
Itbecamecompletelydisappointedaboutgoingupandretestingthe61.80%level,becauseitwent
muchlowerafteritfailedtobreakthe61.80%level.
7.On9Nov2007itbrokethe38.20%levelandmadeaconsolidationaroundthe23.60%level.Like
the61.80%level,the23.60%levelactedassupportandresistanceseveraltimesandaconsolidation
wasformedaroundit.
Asyouknow,consolidationsincluding,triangles,wedges,pennantsandchannelsarecontinuation
patterns.Itmeansthepricewillgotothesamedirectionthatitwasusedtogobeforethe
consolidationforms.
8.Finallyitwentdown,brokethe0.00%levelon2Jan2008.
Whatdoyouthinknow?CanyouignoretheFibonaccinumbersinyourtrades?
Asyouseetheimpacttheyhaveonthemarketisnotnegligibleandindeeditishighlyconsiderable.I
knowthisquestionisformedinyourmindthatwhytheyhavesuchastrongimpactonthemarket.
WhypricebecomestoppedsometimesforseveraldaysbeloworaboveFibonaccilevels?
(OfcourseifyouusetheFibonaccilevelsinthebiggertimeframeslikeweeklyandmonthlycharts,
youwillseethatsometimespricebecomesstoppedbyoneoftheFibonaccilevelsforseveralweeks
ormonths.)
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Theanswerofthisquestionhasnoimpactonourtrading.Imeanwhetheryouknowthereasonor
not,youcanuseFibonaccilevelsinyourtrades.Iknowmostofyoudontcareabouttheanswer,but
someofyouareeagertoknow.
Well!IfFibonaccinumbersareusedintheformationofourbody,fromourgenes(DNAmolecule)to
ourinternalandexternalorgans,Sotheyarealsoeffectiveinourbehaviour.
Andmarketsgoupanddownbecauseofthebehavioroftraders:BuyingandSelling>>>Bulls
andBears
Therefore,marketsreacttoFibonaccilevels.
WhattimeframeisbetterforusingtheFibonaccilevels?
Itdependsonyourtradingsystem.
YoucanuseFibonaccilevelsinalltimeframes.Whenyouusetheminthebiggertimeframeslike
daily,theresultwillbeapplicableforthenextseveraldays,weeksandevenmonthsandwhenyou
usetheminsmallertimeframeslike5minutes,theresultcanbeapplicableonlyforfewhours
becausethepricewillleaveFibonaccilevelsareaverysoon.
YoudrewtheFibonacciLevelsonyourchart.Whatnext?
FibonaccitradingisconsideringtheFibonaccilevelsassupportandresistancelevelsandtaking
properpositionsbasedonthem.AsIalreadyexplained,Fibonaccilevelsactassupportand
resistance.
Sowhenthepriceisgoingupandyouhavealreadytakenalongposition(youhavebought),you
shouldbecarefulwhenthepricebecomesclosetooneoftheFibonaccilevels.Itispossiblethatit
goesdownandyoulosetheprofityouhavealreadymade.Soyouhavetomoveyourstoplosstothe
openpriceofthefirstcandlestickthatistouchingtheFibonaccileveloralittlehigher.Itdependson
thelengthofthecandlestick.
Orsimplyifyouhavemadeenoughprofit,youcancloseyourtradeandwaitforthepricetobreak
theFibonaccilevelsorfailandgodown.Youcantakeanewpositionthen.
Itisthesameaswhenthepriceisgoingdown,butinthiscaseFibonaccilevelsactasresistance.
AlsokeepinmindthatwhenoneoftheFibonaccilevelsisbroken,thepriceusuallypullbacktoretest.
Ifyougetreadyforallthesepossibilities,youwillnotbetrapped.
YoutreatFibonaccilevelslikerealsupportsandresistances.Theyreallyhavenodifferenceand
sometimestheyactevenstronger.
IfyouhavenotunderstoodwhatIhaveexplainedaboveoryouhaveanyquestion,pleaseleavea
commentandIwillgetbacktoyoushortly.
MoreAboutUsingFibonacciinForexTrading
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BelowIamtryingtoexplainmoreaboutusingtheFibonaccinumbersbecauseitreallyworks.
Fibonaccinumbersreallyworkinforextradingbecausetheyreflectthepsychologyofthetradersand
tradingforexandstockisallaboutthepsychologyofthetraders:Whenmosttradersdecidetosell,
thepricegoesdownandwhentheydecidetobuy,thepricegoesup.
Howcanweknowwhentradersdecidetobuyorsell?Fibonaccinumbersareoneofthetoolsthat
reflectwhattradersmayhaveintheirminds.
WhyFibonaccinumberscanreflectwhattradershaveintheirminds?Aretheymagicnumbers?
Well!ForourtradingjobwejustneedtoknowthatFibonaccinumbersworkandcanshowusthe
way.Whytheycanshowusthewayisthequestionthatitsanswerhasnoimpactonourtrading,BUT
Iamsureyouareeagertoknow.Thisisexplainedabove.WhenFibonaccinumbersarethekey
numbersineverythingintheworldfromthearrangementofatoms,molecules,flowersandto
planets,stars,galaxiesandandwhentheycanbeseeninallofourbodyorgansandeveninour
DNAmoleculewhichisthedatabaseofallofourcharacteristicsandbehaviors,SOtheycanbeseen
intheforexandstockpricemovementsbecauseasIsaidthemovementanddirectionofthepriceis
theresultoftraders(buyersandsellers)behavior.
Inmypreviousarticle,Iaskedaquestionthatonlyoneofyoulookedeagertoknow.Iwanttorepeat
thisquestionhereandgivetheanswerafteroneyear:
IdonotknowwhyonlyFibonaccinumbers(specially0.618)andnotanyothernumber(forexample
0.264)canbeseenineverythingintheuniverse.Ifyouaskwhy0.618?Ihavenoanswerforit,but
ifyouaskwhythis0.618canbeseenineverythingfromthesmallestthingslikeatomstothebiggest
thingslikegalaxiesandthereisnoexception,Ihaveananswerforthat.Fibonaccinumberscanbe
seenineverythingsimplybecauseeverythingiscreatedbythesamecreator.
Itmakessense,doesntit?
Ok!NowletslearnmoreaboutusingtheFibonaccinumbersinourtrades.
Oneofthemostimportantproblemsofthetradersisthattheyreallydontknowwheretoplotthe
Fibonaccilevels.letsTheycannotfindthestartandstoppointfordrawingtheFibonaccilevelsand
theychoosewrongplacestoplottheFibonaccilevelsandthiscausesthemtomakemistakes.
1.Range:
OneofthebestplacestoplottheFibonaccilevelsisthehighandlowofarange.Whenthemarketis
slowandinfactisinanindecisionsituationthatmeanstradersarewaitingforeachothersdecision
andnobodywantstotakeriskbeforetheothers,thepricefluctuationwillbecomeverysmallandthe
pricegoesupanddownbetweenanarrowrange.Wecanseeranginginalldifferenttimeframes.
Wecanseethemarketrangingtensoftimesadayinoneminutechart,severaltimesin5minutes
chartandafewtimesperyearinthedailychart.Arangingintheoneminuteschartcanlastseveral
minutesandinadailychartcanlastseveraldays.Sowithanyofthesetimeframesthatyouwork,
therulesarethesame.Itisjustthelengthoftherangingtimewhichisdifferent.
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Arange,whetherlongorshort,willbebrokenbecausethemarketcannotstayinanindecision
situationforever.Arangecanbreakdownorupandthisiswhatwewanttoknowtotakeour
positionsandfollowthemarket.
IfyouareaFibonaccitrader,allyouneedisfindingarangeinoneofthetimeframesandthen
findingthehighandlowoftherange.Letmeshowyousomeanexample.
Pleasefollowthenotesontheimagebelowasyouarereadingtheseexplanations.Thebelowchart
istheGBP/USDdailychart.GBP/USDstartedarangefromabout2008.01.22.Thedistancebetween
highanlowofthisrangewasover1000pips.Itwasstilltradablebutobviouslythemarketwasnotin
atrend.WhenwewereataboutJanuary2008wecouldnotguessthatweareatthebeginningofthe
rangebutwhenthepricewentdownon2008.02.20andretestedthesamesupportlineat1.9329
andthenstartedgoingupagain,wecouldknowthatwehaveastrongsupportat1.9329thatcanbe
thelowofarange.Thenwhenthepricewentupandmadeahighat2.0392on2008.03.14andthen
wentdownandretestedthe1.9329supportforthethirdtimeon2008.05.14wecouldbesurethat
weareinarangingmarket.Pleasenotethatinarangingmarketoneofthetriangle,wedgeoreven
headandshoulderspatternsmaybeseen.
Ifwewerelookingforatrend,allweneedtodowaswaitingfortherangetobebrokendownorup.
Howwecouldknowiftherangewillbreakdownorup?Therearesomewaystoguess.Forexample
makinglowerhighstellsusthattherangewillbreakdown.Inthebelowcase,whenthepriceretested
the1.9329supporton2008.05.14,itwentupagainbutcouldntreachthe2.0392resistanceand
madealowerhighat2.0157on2008.07.15.Whenthepricemakesalowerhighitmeansthemarket
doesnthaveenoughpotencytogoupandreachtheprevioushighitalreadyhad.Sothiscanbe
consideredasasignalthattherangewillbreakdown.Alsothehighwehaveon2008.03.14isa
lowerhighincomparisonwiththehighwehaveon2007.11.09.Butpleasenotethatcasesare
differentandnotallofthelowerhighsmeanthatthepricewillbreakdown.
Thisishowyoushouldseethechartandanalyzethemarketandguesswhatwillhappen.
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Sofarwehavearangeandallofthesignals(higherlows)tellusthatthisrangeshouldbreakdown.
Howeverwhenwearenotsurewhatwillhappenandwhatthedirectionofthebreakoutcanbe,we
havetowaituntilthebreakouthappens.Wereallydonthavetoguessit.Wecanwaitandseeitand
whenthebreakouthappenswecantaketheproperposition.Whenthelowoftherangeisbroken
downwecangoshortandwhenthehighoftherangeisbrokenupwecangolong.
NowitistimetoplotourFibonaccilevels.AsIguessedthattherangewouldbreakdown,Iplotthe
Fibonaccilevelsfromthelowoftherangetothetop.Sothe0.0levelwillbeplacedatthehighofthe
rangeandthe100.0levelwillbeplacedatthelowandalsoallother161.80,261.80and423.60
levelswillbeplacedbelowtherange:
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IfIhadpredictedthattherangewillbreakupIshouldhaveplottedtheFibonaccilevelsfromtopof
therangetothebottomandsothe161.80,261.80and423.60levelswouldbeplacedabovethe
range.
Nowletslookatthechartwithabiggermagnification(thebelowimage),andIwilltellyouhowand
whenyoucouldtaketheproperpositionandwherewouldbeyourtarget.The2008.08.08candlestick
tellsusthattherangeisbrokendownbecauseitisclosedbelowtherangelow.Wecouldgoshortat
thecloseofthiscandlestickifwearenotalreadyshortaftertheformationofthe2008.07.15lower
high.Ourtargetwouldbethe161.80levelandthestoplosshadtobeplacedabovetheopenofthis
candle.
ItistimetotellyouabouttheimportanceofsomeoftheFibonaccilevels.Whenarangeisbroken
up/downthe161.80levelistheguaranteedtargetlevelthatin95%ofthecaseswillbereachedby
theprice.Ifthebreakoutisstrongenough,the261.80andeventhe423.60willbereachedtoo.
AmongtheFibonacciinsidelevels(thelevelsthatareplacedbetweenthe0.0and100.0levels)the
23.60and38.20arethemostimportantoneandasyoucanseethe2008.07.15lowerhigheris
formedexactlybelowthe23.60levelandbeforethislowerhighwehaveasmalllowerhighwhichis
formedbelowthe38.20level(theredarrow).DoyouseehowexactlyandpreciselytheFibonacci
levelswork?
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Sowewentshortatthecloseof2008.08.08candlestickandourtargetwasthe161.80level.Sowe
made520pipssofar.Thepricesstartedgoingupanddownaroundthe161.80level,BUTthe
2008.08.22candlesticktellsusthatbears(sellers)aresostrongandtheywanttotaketheprice
downto261.80level.Sowewentshortatthecloseofthiscandleandourtargetwouldbethe261.80
levelandwemadeanother900pips.Thestoplosshadtobeplacedseveralpipsabovetheopenof
thiscandlewhichisactuallyabovethe161.80level.
Letstakealookatthenextpartsofthechart.Asyousee(thebelowimage)whenthepricereached
the261.60Itwentuptoretestthe161.80level(followthenumbers#1).Itistimetoemphasizeon
theimportanceof161.80level.Thislevelworksasaverystrongsupport/resistance.Whenitis
brokenup/down,itwillberetestedin95%ofthecases.Soyoushouldalwaysexpecttoseetheprice
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goesuptoretestthebroken161.80levelasaresistance.Sothepricegoesupandreteststhe
161.80level(#2)andthengoesdown.Wecouldgoshortagainhere,setthetargetat261.80and
thestoplossabovethe161.80levels.
Againwhenthepricebrokedownthe261.80,itwentupandretestedthislevel,butthe2008.10.20
candleindicatedthatitwouldkeepongoingdownagain.Whythe2008.10.20candle?Becauseitisa
bearishcandlestickthatclosedbelowthelowandthecloseofthelast5candles.Italsohascovered
thewholebodiesandshadowsofthelastthreecandlesandhaveformedabearishsignalpattern
whichiscalledDarkCloudCover.
Sowewentshortagainatthecloseofthe2008.10.20candle,setthestoplossabovethe261.80
levelandthetargetat423.60levelandmadeabout1100pips.
Couldyougolongwhenyousawthepriceisgoingupafterbreakingdownthe261.80level?You
could,butyoushouldnotbecauseitwasagainstthetrenddirection.
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Nowletmetellyouaboutadifferentwaythatwecouldtradewiththisdowntrend.Thisisthemethod
thatsomeconservativetradersusetotradeandIlikeitbecauseitissaferandwiser.
Wecouldwaituntiltherangebecomesbrokendownandthedowntrendbecomesconfirmed.Then
weshouldhavewaitedforthepricetostartgoingupandmakesthefirstcorrection,flagor
consolidation.Thenwhenitstartedfollowingthedowntrendtogodownonceagain,wecouldgo
short.TakealookatthebelowimageandyouwillknowwhatImean.Iamnowtalkingaboutthe
ElliottWaves.WhatIamtryingtosayistradingthesecondElliottWavewhichisthebestone.
2.SecondWave:
JusthaveaneyeonthebelowimageandfollowthenumbersasIamexplaining.Itisexactlythe
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abovechartbutwithadifferentwayoftrading.
Inmanycasesatrendwillbestartedwhenarangebecomesbroken(Asyousawabove).AsIsaid
rangingmeansindecision.Whenwehavearangingmarket,itmeanstradersarewaitingforeach
othertotaketherisk.Theywantthepricetostartmovingandthentaketheproperposition.They
dontwanttotakeanyriskbeforetheothers.Whenthemarketbreakstherange(#1inthebelow
image),thetraderswhohavebeenwaitingforthemarkettomoveandbreaktherange,followthe
newlystartedtrendandtaketheproperposition(shortpositioninthiscase)andthiswillprovide
morefuelforthepricetomovetothebreakoutdirection(togodowninthiscase).
Thenafterawhilethatthemarketkeepsonmoving,sometradersdecidetoclosetheirpositionsand
collecttheirprofitandsothepricestartsmovingtotheotherdirection(#2intheaboveimage).But
therearealsoalotofothertraderswhokeeptheirpositionsandwaitforthepricetostartmovingto
thedirectionofthebreakoutagain.Thesetraderswilladdtothepositionstheyhadandatthesame
timesomeothertraderswhoarelatewillcomeandseethetrendandtaketheproperposition.So
thepricestartsmovingtothedirectionofthetrendagain(#3intheaboveimage).Thisiswheremost
traderstaketheirpositions,becausetheybelievethatthetrendisconfirmedonlywhentheprice
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startsfollowingthebreakoutdirectiononceagain.
Whenthepricestartsfollowingthebreakoutdirection,itisthebeginningofthesecondElliottWave
whichhasthebiggestmovementandisthebesttotrade.Someprofessionaltradersonlytradethis
wave.Attheaboveimage,thesecondwaveisstartedat#3andisfinishedat#8.
Fibonaccilevelsarethebesttoolstoshowusthewavesandourentryandexitpoints:
1.Waitfortherangebreakout(#1).
2.Waitforthepricetostartmovingagainstthebreakout(#2).
3.Waitforthepricetostartfollowingthebreakoutdirectionagain(#3)andtaketheproperposition
(shortpositioninthiscase)andsetthetargettothefirstlowsupportline(#4)andsetthestopabove
the0.0level.
4.Waitforthepricetobreakdownthefirstlowsupportline(#4).
5.Ifitcouldntdothatcloseyourpositionandwaitforthepricetofollowthetrenddirectionagain.
6.Ifitbreaksdownthefirstlowsupportline(#4),butwentuptoretestthebrokensupport(#5)close
yourpositionandwaitforthepricetofollowthetrenddirectionagain.
7.Ifitcouldntbreakingupthebrokensupportandstartedfollowingthetrenddirectionagain(#5and
#6)thentaketheproperpositionagain(shortpositioninthiscase)andsetthe161.80levelasthe
target.
8.Ifitbrokedownthe161.80level(#7)keepyourpositionorifyouhaveclosedittakeitagainand
setthetargetto261.80level(#8).
9.Waitforthepricetoretestthe161.80(#9)andthenitfailedtobreakthe161.80andstarted
followingthetrenddirectionagain,taketheposition(shortpositioninthiscase)andsetthetargetto
261.80again.
10.Itispossiblethatitbreaksthe261.80levelbutretestit(#11,#12and#13).Ifyouseethetrendis
strongenoughtomovetowardthe423.60level,taketheproperposition(shortpositioninthiscase)
andsetthetargetto423.60andplacethestoplossabovethe261.80level.
Yourmainprofitcouldbemadebytradingthesecondwave(#3to#8),andsometradersdonottake
anypositionafterthatbecauseinmostcasesthemarketbecomeschoppyafterthesecondwave.
IwilltrytohavemorearticlesaboutusingtheFibonaccilevelsandshowyoumoreexamplesand
trades.
Exercise:
1.BackTesting:
Trytofindrangesliketheaboveexampleindifferenttimeframesandwithdifferentcurrencypairs.
Findthebreakoutandtheirconfirmationsandreasons.
PlottheFibonaccilevelsandfindtheentryandexitpoints.
Dothiswithasmanycurrencypairsandtimeframesasyoucan.
2.LiveDemoTrading:
ChooseavolatilecurrencypairlikeEur/JPYorGBP/USD
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Gotoashorttimeframelike1minor5min.
Waitforarangetoform.
Findthehighandlowoftherange.
Predictthedirectionofthebreakoutorwaitfortherealbreakout.
PlotyourFibonaccilevels.
Taketheproperpositionwithyoudemoaccount.
Setthestoplossandtarget.
Repeatthisasmanytimesasyoucan.
Note:Thereasonofchoosingashorttimeframeisthat,justforthepracticingpurposeIdontwant
youtowaitalotforarangeandbreakouttoform.Iamnotsuggestingyoutotradetheshorttime
frameslike1minor5min.Thisisuptoyouanditdependsoneverybodystradingstyle.
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