I want to briefly explain a fibonacci trading strategy I use on a daily basis. I look at two key retracement lines: the 61.8% and 50% fib retracements. This I call this zone the "hot zone". I will pay close attention when prices retace or pullback to this zone.
Uptrend strategy: In an uptrend, I want prices to retrace below the 50% fibonacci retracement but close above the 61.8% retracement. If the hot zone acts as a key support zone, I will enter a long position with a 3-5 tick stop below the 61.8% retracement line. I will scale out +10 for the dow mini's and exit all or most of my position at the previous swing high.
Downtrend strategy: In a downtrend, I want price to retrace back to the 50% fibonacci retracement line but not close below the 61.8% retracement. I am looking for the hot zone to act as a key resistance level. I will enter a short position using a 3-5 tick stop above the 61.8% retracement. I will scale out +10 for the dow mini's and exit all or most of my position at the previous swing low.
Just remember this: 61.8% for an uptrend & 50% for a downtrend. These are the two main levels I will look at. I time my entries based on the tape. For those who are not tape readers, I highly recommend you put the time and effort into learning this valuable skill.
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