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  1. Fibonacci and Trade Scaling When I first started trading I was losing in most of my positions – as everyone does. I started trading with no real strategy and whatever activity I was conducting should be described more as gambling than as trading. This is because there was no real ‘rhyme or reason’ to my approach and since I was randomly selecting assets to buy or sell, I had no better chance than guessing a coin flip on any given occasion. Of course, many lessons followed and a good deal of those had to do with the technical analysis techniques I have written about in the Forex column of this website. But not everything comes down to mathematical probabilities, and there is a good deal of ‘common sense’ that is employed by every successful trader. One example of this can be seen in the fact that it is essentially impossible to consistently nail down the perfect trade entry. It is possible to get lucky now and then – even a stopped clock is right twice a day. But expecting to do this with any consistency is totally unrealistic and should not even be viewed as an approachable goal. Does this mean that traders should feel hopeless when making the decision to pull the trigger on a trade? Not at all. Separating Your Trade Entries The first mistake that many traders make is to place an entire position stake in a single location. For example, you are bullish on the Euro and you decide to buy the EUR/USD at 1.35. At best, these novice traders will at least follow the conventional wisdom and never enter into a position that puts more than 2% of your total account at risk. But this is not nearly enough trade planning as it still suggests that the trader had entered into the position at the exact right time and place. Since this is almost never the case, more work needs to be done in the planning stages – before any orders are executed. Specifically, this means separating your positions into multiple parts. “The easiest way to scale into positions if doing to divide your trade size in twos or threes,” said Tony Davis, head trader at Atlanta Gold and Coin. “and then to find two or three places on your chart where price activity is likely to work in your favor (i.e. clearly defined support or resistance levels).” Risks I first realized that this was a preferable approach during a GBP/JPY trade, which as you might know is one of the more volatile forex pairs. At this stage, I was mostly looking for trades that risked about 125-150 pips but I quickly learned that this was an unrealistic expectation for this low-liquidity pair, which is capable of significant intraday moves. In this case, I quickly found my position in negative territory, down -150 pips, and I had to make a decision because I was starting to exceed my previous risk threshold. Some traders argue that you should never deviate from your original game plan, but I could never totally agree with that. Instead, I chose to double my position, and improve on my average price. In this case, the trade did rebound in my favor and I was able to close out at a profit. Some experienced traders would argue that the above approach was a bad idea – and in some ways they are correct. I did break my original trading rules and expose myself to double the losses in a market that was already working against me. But I think the most valuable lesson for me in this case was that establishing your entire position in the same location (the same price level), is one of the biggest mistakes that a trader can make. Does that mean I should have doubled my position in the above scenario? No. It means that I should have divided my position in half (or in thirds, fourths, etc), and then scaled into the position once the market started working against me. Of course, this means that your regular trading activities are going to become much more complicated. You cannot simply find a support or resistance level and then place your entire order in that area. Instead, you will need to find two or three (or more) separate entries and actively expect that the market is going to start working against you. Could the market immediately turn in your favor? Of course, and in this case you would not be trading at a full position size (which also means reduced profits). But what is most important here is to adequately manage risk and protect yourself from unnecessary losses. This benefit outweighs even the more substantial profits that would have been realized if you had staked your entire position and the market immediately started to work in your favor. The reason for this comes from the fact that the favorable scenario is far less likely, and will happen much less often when compared to situations where your initial trade entry was ‘less than perfect.’ Possible Strategies (Chart Source: Orbex) The next question you should be asking yourself here is: How can I find multiple entry points for a single trade? There are many ways of doing this. Even the simplest technical analysis strategies will generally outline more than one support or resistance level on any given chart, and these can be used to define price areas that that agree with your original strategy. For example, in the chart above, we can see relatively clear historical resistance levels in the Euro at 1.37 and just above 1.38. Many charts will have more than two support or resistance lines drawn. So hypothetically, there would be nothing wrong with establishing half a short position once prices reach 1.37 and then wait to add on the second half if prices continue higher into the 1.38s. This would give you an average position size of roughly 1.3760, rather than your original 1.37. When you have live positions, this added trade cushioning can make a significant difference if things start to work out unfavorably. But what is even more important here is the fact that prices would have had to break all of your original prices and the next one in order to stop you out. Moves like this are relatively unlikely, and these types of market tendencies are outlined in these courses to learn finance online. This is one way that traders can turn the probabilities in their own favor, and this is a strategy approach that should be applied in almost all cases. Fibonacci Fibonacci studies offer another possibility. But what is most important to remember with Fibonacci is that the numbers should be viewed as approximations. Many traders claim to base positions on the ‘cosmic nature’ of the Fibonacci sequence (the Golden Ratio). The financial markets are just another organism in the universe, why wouldn't they follow the rules of physics that every other entity must follow (tree branches, shell shapes, hurricanes, etc.). Not all of us subscribe to these types of ideas and not all us us feel the need to define a retracement by its relationship to the 38.2% or 61.8% Fib level. Instead, I am interested in what is happening to the price at any given moment. Is something likely to happen in this asset? Right now? If not, move on to the next chart. If so, start looking at how a trade could be positioned. It is just as acceptable to view these retracements in thirds, so instead of the 38.2% retracement, you are viewing the market as having had a one-third retracement of its original move. Let’s say your criteria are met. In order to use Fibonacci, you need to identify a predetermined price move. This is easier said than done because there are a lot of prices moves on a price chart. Everything that happens on a price chart is a price move. Fibonacci Example Not enough space here to get into how to define a retracement move. I have explained Fibonacci in depth here in other articles (for example, here and here). The graphic below shows how you should be looking at when using Fibonacci to scale into a position. (Chart Source: Orbex) In the chart above, we can see clearly defined Fib resistance at 1.3770 (38.2% retracement), at 1.3820 ( the 50% retracement), and at 1.3860 (the 61.8% retracement). Traders looking to enter into bearish positions could place one short entry at each of these levels (a third in each position), with a stop above the two-thirds retracement of the original decline. This would allow you to scale into your position and protect against major upside risk while using the Fibonacci retracement.
  2. Ok, I am always been a big fan of 61.8% Fibonacci Ratio (so is 50%) - but why are Fibonacci Ratios of 88.6%, 78.6%, 127.2% useful? I see them in Gartley patterns and the instrument I trade - GC futures. I saw many threads online regarding it is good in Forex ... However, no one had address the issue of why it works - I see the pattern in GC for 88.6% on the 60 min chart from last Friday up to current, for example, in addition to the 61.8% and 50%. My objective is to determine why it works and hopefully determine when it will have a higher probably of working.
  3. Introducing Fibonacci Statue of Leonardo Fibonacci, Pisa, Italy. The inscription reads, "A. Leonardo Fibonacci, Insigne Matematico Piisano del Secolo XII." Photo by Robert R. Prechter, Sr. HISTORICAL AND MATHEMATICAL BACKGROUND OF THE WAVE PRINCIPLE The Fibonacci (pronounced fib-eh-nah´-chee) sequence of numbers was discovered (actually rediscovered) by Leonardo Fibonacci da Pisa, a thirteenth century mathematician. We will outline the historical background of this amazing man and then discuss more fully the sequence (technically it is a sequence and not a series) of numbers that bears his name. When Elliott wrote Nature's Law, he referred specifically to the Fibonacci sequence as the mathematical basis for the Wave Principle. It is sufficient to state at this point that the stock market has a propensity to demonstrate a form that can be aligned with the form present in the Fibonacci sequence. (For a further discussion of the mathematics behind the Wave Principle, see "Mathematical Basis of Wave Theory," by Walter E. White, in New Classics Library's forthcoming book.) In the early 1200s, Leonardo Fibonacci of Pisa, Italy published his famous Liber Abacci (Book of Calculation) which introduced to Europe one of the greatest mathematical discoveries of all time, namely the decimal system, including the positioning of zero as the first digit in the notation of the number scale. This system, which included the familiar symbols 0, 1, 2, 3, 4, 5, 6, 7, 8 and 9, became known as the Hindu-Arabic system, which is now universally used. Under a true digital or place-value system, the actual value represented by any symbol placed in a row along with other symbols depends not only on its basic numerical value but also on its position in the row, i.e., 58 has a different value from 85. Though thousands of years earlier the Babylonians and Mayas of Central America separately had developed digital or place-value systems of numeration, their methods were awkward in other respects. For this reason, the Babylonian system, which had been the first to use zero and place values, was never carried forward into the mathematical systems of Greece, or even Rome, whose numeration comprised the seven symbols I, V, X, L, C, D, and M, with non-digital values assigned to those symbols. Addition, subtraction, multiplication and division in a system using these non-digital symbols is not an easy task, especially when large numbers are involved. Paradoxically, to overcome this problem, the Romans used the very ancient digital device known as the abacus. Because this instrument is digitally based and contains the zero principle, it functioned as a necessary supplement to the Roman computational system. Throughout the ages, bookkeepers and merchants depended on it to assist them in the mechanics of their tasks. Fibonacci, after expressing the basic principle of the abacus in Liber Abacci, started to use his new system during his travels. Through his efforts, the new system, with its easy method of calculation, was eventually transmitted to Europe. Gradually the old usage of Roman numerals was replaced with the Arabic numeral system. The introduction of the new system to Europe was the first important achievement in the field of mathematics since the fall of Rome over seven hundred years before. Fibonacci not only kept mathematics alive during the Middle Ages, but laid the foundation for great developments in the field of higher mathematics and the related fields of physics, astronomy and engineering. Although the world later almost lost sight of Fibonacci, he was unquestionably a man of his time. His fame was such that Frederick II, a scientist and scholar in his own right, sought him out by arranging a visit to Pisa. Frederick II was Emperor of the Holy Roman Empire, the King of Sicily and Jerusalem, scion of two of the noblest families in Europe and Sicily, and the most powerful prince of his day. His ideas were those of an absolute monarch, and he surrounded himself with all the pomp of a Roman emperor. The meeting between Fibonacci and Frederick II took place in 1225 A.D. and was an event of great importance to the town of Pisa. The Emperor rode at the head of a long procession of trumpeters, courtiers, knights, officials and a menagerie of animals. Some of the problems the Emperor placed before the famous mathematician are detailed in Liber Abacci. Fibonacci apparently solved the problems posed by the Emperor and forever more was welcome at the King's Court. When Fibonacci revised Liber Abacci in 1228 A.D., he dedicated the revised edition to Frederick II. It is almost an understatement to say that Leonardo Fibonacci was the greatest mathematician of the Middle Ages. In all, he wrote three major mathematical works: the Liber Abacci, published in 1202 and revised in 1228, Practica Geometriae, published in 1220, and Liber Quadratorum. The admiring citizens of Pisa documented in 1240 A.D. that he was "a discreet and learned man," and very recently Joseph Gies, a senior editor of the Encyclopedia Britannica, stated that future scholars will in time "give Leonard of Pisa his due as one of the world's great intellectual pioneers." His works, after all these years, are only now being translated from Latin into English. For those interested, the book entitled Leonard of Pisa and the New Mathematics of the Middle Ages, by Joseph and Frances Gies, is an excellent treatise on the age of Fibonacci and his works. Although he was the greatest mathematician of medieval times, Fibonacci's only monuments are a statue across the Arno River from the Leaning Tower and two streets which bear his name, one in Pisa and the other in Florence. It seems strange that so few visitors to the 179-foot marble Tower of Pisa have ever heard of Fibonacci or seen his statue. Fibonacci was a contemporary of Bonanna, the architect of the Tower, who started building in 1174 A.D. Both men made contributions to the world, but the one whose influence far exceeds the other's is almost unknown. The Fibonacci Sequence In Liber Abacci, a problem is posed that gives rise to the sequence of numbers 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, and so on to infinity, known today as the Fibonacci sequence. The problem is this: How many pairs of rabbits placed in an enclosed area can be produced in a single year from one pair of rabbits if each pair gives birth to a new pair each month starting with the second month? In arriving at the solution, we find that each pair, including the first pair, needs a month's time to mature, but once in production, begets a new pair each month. The number of pairs is the same at the beginning of each of the first two months, so the sequence is 1, 1. This first pair finally doubles its number during the second month, so that there are two pairs at the beginning of the third month. Of these, the older pair begets a third pair the following month so that at the beginning of the fourth month, the sequence expands 1, 1, 2, 3. Of these three, the two older pairs reproduce, but not the youngest pair, so the number of rabbit pairs expands to five. The next month, three pairs reproduce so the sequence expands to 1, 1, 2, 3, 5, 8 and so forth. Figure 3-1 shows the Rabbit Family Tree with the family growing with logarithmic acceleration. Continue the sequence for a few years and the numbers become astronomical. In 100 months, for instance, we would have to contend with 354,224,848,179,261,915,075 pairs of rabbits. The Fibonacci sequence resulting from the rabbit problem has many interesting properties and reflects an almost constant relationship among its components. Figure 3-1 The sum of any two adjacent numbers in the sequence forms the next higher number in the sequence, viz., 1 plus 1 equals 2, 1 plus 2 equals 3, 2 plus 3 equals 5, 3 plus 5 equals 8, and so on to infinity. The Golden Ratio After the first several numbers in the sequence, the ratio of any number to the next higher is approximately .618 to 1 and to the next lower number approximately 1.618 to 1. The further along the sequence, the closer the ratio approaches phi (denoted f) which is an irrational number, .618034.... Between alternate numbers in the sequence, the ratio is approximately .382, whose inverse is 2.618. Refer to Figure 3-2 for a ratio table interlocking all Fibonacci numbers from 1 to 144. Figure 3-2 Phi is the only number that when added to 1 yields its inverse: .618 + 1 = 1 ÷ .618. This alliance of the additive and the multiplicative produces the following sequence of equations: .6182 = 1 - .618, .6183 = .618 - .6182, .6184 = .6182 - .6183, .6185 = .6183 - .6184, etc. or alternatively, 1.6182 = 1 + 1.618, 1.6183 = 1.618 + 1.6182, 1.6184 = 1.6182 + 1.6183, 1.6185 = 1.6183 + 1.6184, etc. Some statements of the interrelated properties of these four main ratios can be listed as follows: 1) 1.618 - .618 = 1, 2) 1.618 x .618 = 1, 3) 1 - .618 = .382, 4) .618 x .618 = .382, 5) 2.618 - 1.618 = 1, 6) 2.618 x .382 = 1, 7) 2.618 x .618 = 1.618, 8) 1.618 x 1.618 = 2.618. Besides 1 and 2, any Fibonacci number multiplied by four, when added to a selected Fibonacci number, gives another Fibo-nacci number, so that: 3 x 4 = 12; + 1 = 13, 5 x 4 = 20; + 1 = 21, 8 x 4 = 32; + 2 = 34, 13 x 4 = 52; + 3 = 55, 21 x 4 = 84; + 5 = 89, and so on. As the new sequence progresses, a third sequence begins in those numbers that are added to the 4x multiple. This relationship is possible because the ratio between second alternate Fibonacci numbers is 4.236, where .236 is both its inverse and its difference from the number 4. This continuous series-building property is reflected at other multiples for the same reasons. 1.618 (or .618) is known as the Golden Ratio or Golden Mean. Its proportions are pleasing to the eye and an important phenomenon in music, art, architecture and biology. William Hoffer, writing for the December 1975 Smithsonian Magazine, said: ...the proportion of .618034 to 1 is the mathematical basis for the shape of playing cards and the Parthenon, sunflowers and snail shells, Greek vases and the spiral galaxies of outer space. The Greeks based much of their art and architecture upon this proportion. They called it "the golden mean." Fibonacci's abracadabric rabbits pop up in the most unexpected places. The numbers are unquestionably part of a mystical natural harmony that feels good, looks good and even sounds good. Music, for example, is based on the 8-note octave. On the piano this is represented by 8 white keys, 5 black ones — 13 in all. It is no accident that the musical harmony that seems to give the ear its greatest satisfaction is the major sixth. The note A vibrates at a ratio of .62500 to the note C. A mere .006966 away from the exact golden mean, the proportions of the major sixth set off good vibrations in the cochlea of the inner ear — an organ that just happens to be shaped in a logarithmic spiral. The continual occurrence of Fibonacci numbers and the golden spiral in nature explains precisely why the proportion of .618034 to 1 is so pleasing in art. Man can see the image of life in art that is based on the golden mean. Nature uses the Golden Ratio in its most intimate building blocks and in its most advanced patterns, in forms as minuscule as atomic structure, microtubules in the brain and DNA molecules to those as large as planetary orbits and galaxies. It is involved in such diverse phenomena as quasi crystal arrangements, planetary distances and periods, reflections of light beams on glass, the brain and nervous system, musical arrangement, and the structures of plants and animals. Science is rapidly demonstrating that there is indeed a basic proportional principle of nature. By the way, you are holding your mouse with your five appendages, all but one of which have three jointed parts, five digits at the end, and three jointed sections to each digit. Fibonacci Geometry The Golden Section Any length can be divided in such a way that the ratio between the smaller part and the larger part is equivalent to the ratio between the larger part and the whole (see Figure 3-3). That ratio is always .618. Figure 3-3 The Golden Section occurs throughout nature. In fact, the human body is a tapestry of Golden Sections (see Figure 3-9) in everything from outer dimensions to facial arrangement. "Plato, in his Timaeus," says Peter Tompkins, "went so far as to consider phi, and the resulting Golden Section proportion, the most binding of all mathematical relations, and considered it the key to the physics of the cosmos." In the sixteenth century, Johannes Kepler, in writing about the Golden, or "Divine Section," said that it described virtually all of creation and specifically symbolized God's creation of "like from like." Man is the divided at the navel into Fibonacci proportions. The statistical average is approximately .618. The ratio holds true separately for men, and separately for women, a fine symbol of the creation of "like from like." Is all of mankind's progress also a creation of "like from like?" The Golden Rectangle The sides of a Golden Rectangle are in the proportion of 1.618 to 1. To construct a Golden Rectangle, start with a square of 2 units by 2 units and draw a line from the midpoint of one side of the square to one of the corners formed by the opposite side as shown in Figure 3-4. Figure 3-4 Triangle EDB is a right-angled triangle. Pythagoras, around 550 B.C., proved that the square of the hypotenuse (X) of a right-angled triangle equals the sum of the squares of the other two sides. In this case, therefore, X2 = 22 + 12, or X2 = 5. The length of the line EB, then, must be the square root of 5. The next step in the construction of a Golden Rectangle is to extend the line CD, making EG equal to the square root of 5, or 2.236, units in length, as shown in Figure 3-5. When completed, the sides of the rectangles are in the proportion of the Golden Ratio, so both the rectangle AFGC and BFGD are Golden Rectangles. Figure 3-5 Since the sides of the rectangles are in the proportion of the Golden Ratio, then the rectangles are, by definition, Golden Rectangles. Works of art have been greatly enhanced with knowledge of the Golden Rectangle. Fascination with its value and use was particularly strong in ancient Egypt and Greece and during the Renaissance, all high points of civilization. Leonardo da Vinci attributed great meaning to the Golden Ratio. He also found it pleasing in its proportions and said, "If a thing does not have the right look, it does not work." Many of his paintings had the right look because he used the Golden Section to enhance their appeal. While it has been used consciously and deliberately by artists and architects for their own reasons, the phi proportion apparently does have an effect upon the viewer of forms. Experimenters have determined that people find the .618 proportion aesthetically pleasing. For instance, subjects have been asked to choose one rectangle from a group of different types of rectangles with the average choice generally found to be close to the Golden Rectangle shape. When asked to cross one bar with another in a way they liked best, subjects generally used one to divide the other into the phi proportion. Windows, picture frames, buildings, books and cemetery crosses often approximate Golden Rectangles. As with the Golden Section, the value of the Golden Rectangle is hardly limited to beauty, but serves function as well. Among numerous examples, the most striking is that the double helix of DNA itself creates precise Golden Sections at regular intervals of its twists (see Figure 3-9). While the Golden Section and the Golden Rectangle represent static forms of natural and man-made aesthetic beauty and function, the representation of an aesthetically pleasing dynamism, an orderly progression of growth or progress, can be made only by one of the most remarkable forms in the universe, the Golden Spiral. The Golden Spiral A Golden Rectangle can be used to construct a Golden Spiral. Any Golden Rectangle, as in Figure 3-5, can be divided into a square and a smaller Golden Rectangle, as shown in Figure 3-6. This process then theoretically can be continued to infinity. The resulting squares we have drawn, which appear to be whirling inward, are marked A, B, C, D, E, F and G. Figure 3-6 Figure 3-7 The dotted lines, which are themselves in golden proportion to each other, diagonally bisect the rectangles and pinpoint the theoretical center of the whirling squares. From near this central point, we can draw the spiral as shown in Figure 3-7 by connecting the points of intersection for each whirling square, in order of increasing size. As the squares whirl inward and outward, their connecting points trace out a Golden Spiral. The same process, but using a sequence of whirling triangles, also can be used to construct a Golden Spiral. At any point in the evolution of the Golden Spiral, the ratio of the length of the arc to its diameter is 1.618. The diameter and radius, in turn, are related by 1.618 to the diameter and radius 90° away, as illustrated in Figure 3-8. Figure 3-8 The Golden Spiral, which is a type of logarithmic or equiangular spiral, has no boundaries and is a constant shape. From any point on the spiral, one can travel infinitely in either the outward or inward direction. The center is never met, and the outward reach is unlimited. The core of a logarithmic spiral seen through a microscope would have the same look as its widest viewable reach from light years away. As David Bergamini, writing for Mathematics (in Time-Life Books' Science Library series) points out, the tail of a comet curves away from the sun in a logarithmic spiral. The epeira spider spins its web into a logarithmic spiral. Bacteria grow at an accelerating rate that can be plotted along a logarithmic spiral. Meteorites, when they rupture the surface of the Earth, cause depressions that correspond to a logarithmic spiral. Pine cones, sea horses, snail shells, mollusk shells, ocean waves, ferns, animal horns and the arrange- ment of seed curves on sunflowers and daisies all form logarithmic spirals. Hurricane clouds and the galaxies of outer space swirl in logarithmic spirals. Even the human finger, which is composed of three bones in Golden Section to one another, takes the spiral shape of the dying poinsettia leaf when curled. In Figure 3-9, we see a reflection of this cosmic influence in numerous forms. Eons of time and light years of space separate the pine cone and the spiraling galaxy, but the design is the same: a 1.618 ratio, perhaps the primary law governing dynamic natural phenomena. Thus, the Golden Spiral spreads before us in symbolic form as one of nature's grand designs, the image of life in endless expansion and contraction, a static law governing a dynamic process, the within and the without sustained by the 1.618 ratio, the Golden Mean. Figure 3-9a Figure 3-9b Figure 3-9c Figure 3-9d Figure 3-9e Figure 3-9f
  4. I had a couple people ask me to start a Fibonacci thread so here it is. As you've probably heard me mention in other posts I enter at 50% lines I use a 6 tick stop on the ES and 8 pip stop on the Euro (6E). I trade in contracts of 2 and take half off at +2 on the ES +4 on 6E. I use a target of 23% past highs. Be interest to hear how you trade using fibs.
  5. Dharmik Team


    In this article we will discuss about a widespread, well-known key element of technical analysis. Why do you think technical analysis especially some elements work so well for financial markets? Why do you think Fibonacci levels are usually strictly followed? Because thousands and billions of traders and computer programs for trading use these elements. This way everybody acts the same at the same time… This is why we decided to present in the category of technical analysis, the most used and well-known methods of predicting financial evolution. These methods are easy to understand and are very efficient. We will discuss about Fibonacci levels. We will find out what Fibonacci levels are and how they are calculated. We will use them in our charts and we will see how they act. We will discover how useful Fibonacci levels are and, at the end, we will draw the conclusions. We will use Fibonacci levels daily in our analyzing and trading system. 1. What are Fibonacci levels? The truth about Fibonacci levels is that they are useful (like all trading indicators). They do not work as a standalone system of trading and they are certainly not the “holy grail”, but can be a very effective component of your trading strategy. But who is Fibonacci and how can he help you with your trading? Leonardo Fibonacci was a great Italian mathematician who lived in the thirteenth century who first observed certain ratios of a number series that are regarded as describing the natural proportions of things in the universe, including price data. The ratios arise from the following number series: 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 This series of numbers is derived by starting with 1 followed by 2 and then adding 1 + 2 to get 3, the third number. Then, adding 2 + 3 to get 5, the fourth number, and so on. 2. How are Fibonacci levels calculated? The ratios are derived by dividing any number in the series by the next higher number, after 3 the ratio is always 0.625. After 89, it is always 0.618. If you divide any Fibonacci number by the preceding number, after 2 the number is always 1.6 and after 144 the number is always 1.618. These ratios are referred to as the “golden mean.” Additional ratios were then derived to create ratio sets as follows: The first set of ratios is used as price retracement levels and is used in trading as possible support and resistance levels. The reason we have this expectation is that traders all over the world are watching these levels and placing buy and sell orders at these levels which becomes a self-fulfilling expectation. The second set is used as price extension levels and is used in trading as possible profit taking levels. Again, traders all over the world are watching these levels and placing buy and sell orders to take profits at these levels which becomes a self-fulfilling expectation. Most good trading software packages include both Fibonacci Retracement Levels and Price Extension Levels. In order to apply Fibonacci levels to price charts, it is necessary to identify Swing Highs and Swing Lows. A Swing High is a short term high bar with at least two lower highs on both the left and right of the high bar. A Swing Low is a short term low bar with at least two higher lows on both the left and right of the low bar. Fibonacci Retracement Levels In an uptrend, the general idea is to go long the market on a retracement to a Fibonacci support level. The price retracement levels can be applied to the price bar chart of any market by clicking on a significant Swing Low and dragging the cursor to the most recent potential Swing High and clicking there. This will display each of the Retracement Levels showing both the ratio and corresponding price level. Let’s take a look at some examples of markets in an uptrend. The same points made by these examples are equally applicable to markets in a downtrend. 3. Chart examples for Dow and e-mini S&P 500. 1. In the first example we have an ascending trend and a Fibonacci retracement of 38%. After the price went down 38% of the entire going up value, it returned to an uptrend. The 38% retrace is the best moment to initiate long positions. 2. Here the image is reverse. We have a downtrend, a 38% pull back and then the price continued to go down. 3. The price had a 50% retrace during an ascending trend. 4. The ascending trend had a 61% pull back. 5. The last example shows a good moment to enter long after a 50% retrace 4. Conclusions a. Correctly used and followed, Fibonacci levels along other technical analysis and astrological analysis methods can offer complex and correct information for profitable transactions. b. Trading methods based on Fibonacci levels can be found and can work very well. These methods can be harmoniously correlated with other methods of financial analysis resulting in a complete and complex trading system approaching financial reality. c. We often use Fibonacci levels amongst other various methods of analysis that we will describe later. Dharmik Team
  6. What are Fibonacci levels? In this article we will discuss about a widespread, well-known key element of technical analysis. Why do you think technical analysis especially some elements work so well for financial markets? Why do you think Fibonacci levels are usually strictly followed? Because thousands and billions of traders and computer programs for trading use these elements. This way everybody acts the same at the same time… This is why we decided to present in the category of technical analysis, the most used and well-known methods of predicting financial evolution. These methods are easy to understand and are very efficient. We will discuss about Fibonacci levels. We will find out what Fibonacci levels are and how they are calculated. We will use them in our charts and we will see how they act. We will discover how useful Fibonacci levels are and, at the end, we will draw the conclusions. We will use Fibonacci levels daily in our analyzing and trading system. Read full article at http://bit.ly/fsL82U
  7. Do you trade the Eurodollar? I use a 233 tick chart alongside a 15-min. I enter at the first 233t setup at a 50% Fibonacci levels using an 8 pip stop. Does anyone else trade in similar fashion? It's always interesting comparing entry's as there's a million ways to skin a cat. I attached a small photo below, long entry of 2934 (1 pip in front of the 50).
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