When should you start trading – my favorite system
There are many different ways to combine the Fibonacci tool. I will now describe the safest option that works very well for me. Option is used by many professional traders.
The basic idea is to buy when the correction ends and there is an outbreak. We are looking for a place where there is the greatest chance to enter at the right moment and the right direction.
In theory, it should look like this:
The playing field is simple:
1. Identify the major trend (you can read the instruction in part 7). You should know what the main trend is.
2. Identify the low-high / high-low swing.
3. Wait until the correction ends. Let the others play between the retracementlinjerna. You need to be ready and waiting for it to come in.
4. Wait until the price breaks above the highest level – turn A-B (go long) or below the lowest level – turn A-B (then go short).
5. Wait until the price reaches förlängningslinjen and closes on D
The main difference between a Fibonacci trader and an ordinary investor
There is a huge difference between the Fibonacci traders, and ordinary investors. An ordinary investors open their positions at the right time, but there are problems with the closing. He gets some inputs, but is usually late with their utgångsbeslut.
With the help of the Fibonacci tool, on many occasions, to close his position almost exactly at the end of the movement.
Now we are going to reduce the risk. When the price closes over the top, the movement will continue upwards.
We close the position on the förlängningslinjen. Your goal is to capture the movement between 100% and 127%, 138,2% and 161,8% etc
Below we see a 4-timmarsdiagram for the GBP / USD. We know that the main trend is rising. There is a deep correction (down to the level of 61,8%, point C). Here we are waiting for an outbreak.
The price breaks above point B (färegånde top). The potentiala vinstzonen marked with green (it can be even higher), i.e. the point between B and förlängningslinjerna.
The disadvantage with this scenario is that the price may explode by the revamped top / bottom. Don’t worry – it just happens sometimes. Otherwise you waiting for a correction. Sooner or later there will be a strong correction, and perhaps a better opportunity to enter the trade.
The key to success is practice and patience. On some trading days you may have a couple or even several good setups and successful trades.
And sometimes you end up with losses. It is important to not trade if you do not want to.
The example below, a 4-hour silver chart shows that the trend is rising. This means that we can buy silver. We identify the AB swing and waiting for a correction.
Take a closer look at the chart and notice how fast the movement was. The price climbed up to 161,8% förlängningslinje – line works as a strong resistance. Right afterwards, there was a strong …… Those that use lagging indicators ended with a loss.
Let us take a look at how this strategy can be used in a downward trend. The chart (WTI oil) below shows that the trend is falling. We take a short position (selling WTI). It is easy to find the AB swing. The correction ended at C (78% retracement line). Now we are waiting for an outbreak in the point B. the Movement was very strong and ended at 200% förlängningslinjen.
To set the SL in this scenario
The Stop loss should be placed at the starting point. We assume that a break above the last peak leads to a strong movement. If the price moves back to the retracement levels, there is probably something wrong with the trend (at least in that moment).
My advice: when the price goes back below the retracement level 23,6%, should the trade be closed. Of course, with the help of stop loss order.
The Stop loss 23,6% is just my recommendation, but you can clearly change it. Then try to set the stop loss order at 14,6% retracemen — line (the line also serves as a retracement level)
To set your stop loss at the 23,6% is not a good idea. If the price moves in an opposite direction, should the trade be closed directly.
Profit / Förlustrelationen
A return ratio of around 50% should give you a positive balance in your account. You risk a little and you will likely get more. Some positions will be closed at the 127% förlängnins line with the small gain. But as you can see, some of them can be closed at 161,8% förlängningslinje or even longer!