Many of you may be familiar with the 61.8% fibonacci retracement trades. I used to use plenty of fibs in my trading but have recently drifted away from it. However, fibs can not be ignored as they are followed by many traders and can play a critical role in price movement.
The 61.8% fib retracement is a commonly used setup by day traders. In this post, I have added one filter to this setup: FORGET the small swings and apply fibs to the bigger swings. Let me explain:
In this example, I have applied the fib lines from the swing low to the swing high. Im basically using fibs lines for moves of over 50+ points on the YM. I find that they work more effectly on a bigger swing rather than trying to use fib retracement strategies on a small price movement.
This is an example of a 61.8% fib retracement failure using a 38 point swing.
This chart below uses a 54 point swing. Although price declined afterwards, the initial 61.8% retracement setup would of worked for 20+ points.
Of course there are many different techniques to use fibs in your trading. But for those who are familiar with some of my setups through the chat room, I will be looking to apply this one into my trading. I have used this technique in the past successfully but am now incorporating a stricter rule of 50 points. Why 50? Fib setups is just an extra in my trading since I am mainly a pivot and MP based trader. 61.8% fib retracements seem to work fairly well in a 50+ swing move so will be looking to take this setup whenever it happens. From the look of it, I'll be lucky if I get it once every 2 trading days.
Please leave me your feedbacks. Thanks