Simple fib Strategy

[feb2865]

Hello


Almost every trader I know use fib retracements. I have never been such a fan of fibs until recent years. I use them in a non-conventional way. See, everyone buy/sell on the pullback, preferably 50% or 61.8%. I like to have a resting order above (1-2 ticks/pips) the 1% (some charts have this labeled at the 0 line) line when the pullback is for real.

In my observation, once the market pullback, especially form these areas, is like a spring throwing a stone up in the air. It reaches the 1% line frequently. Notice how momentum increases, of course more often than not. There's always exceptions.

But there’s some considerations to be made

1) How far/close are 100% line form any pivot/midpoint or S/R level
2) How far/close are the retracement AKA 50% or 61.8% line from the 1% line
3) Whether your stop-loss is around your comfort zone/risk tolerance

Back to #1 ALWAYS be attentive at key levels when you use this strategy. Use them either as a profit target or if you trade gets too close to it, better let it go and rely on key levels to trade instead.

Confluence between fibs and Key levels are sweet.

I usually set stop loss close of 78% area. I ALWAYS trail my stops away from the market at a reasonable distance level, that way I don’t get stopped out frequently and gives the trade room to go.

This strategy comes very handy especially on some particular days when Pivots and S/R lines seems out of range. Of course you can always correlate other indices looking for pressure points. But sometimes it becomes kinda hasty.


As to how to set stop-loss / all depends on your risk tolerance and daily target.

Be careful with Fibonacci stuff. Its too discretionary. That’s why I don’t like to trade off pullbacks.

The first charts are from Fed day 9/18/2007 Morning trade. Notice that the distance between entry and exit was 18 ticks. In my time we use to say that the trade has “meat”.

The second charts are from the announcement itself. Notice the beautiful pullback to the 50% line This time I decided to use the pivot line and fade the trade instead.

I normally use 5 minutes charts and 30 minutes for market direction In announcements, I get down to 2 min charts to get a quicker entry.

I don’t day trade anymore or at least as I use to be. I made an exception yesterday. It was good.

Remember that the holy grail doesn’t exist. Use always discretion with any strategy and always have more options under your sleeve.

Cheers

[Reaver]

Nice work Feb. Thanks for the info.