Fibonacci Forex trading strategies that work require a couple extra little-known, but simple, techniques to make them profitable. This Fibonacci Forex tutorial video provides you with those techniques. Whether you’re trading Fibonacci retracements or Fibonacci extensions, this video will show you how to use Forex Fibonacci numbers that work in real life.
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VIDEO TRANSCRIPT
Welcome to this brief tutorial on Fibonacci Forex trading strategies that work. We are going to go a little beyond the basics of Fibonacci today. And I am going to share with you, well I wouldn’t say it’s advanced but it’s definitely intermediate, so let’s jump right into it.
FIBONACCI FOREX TRADING STRATEGIES THAT WORK
So one of the most basic techniques for using Forex Fibonacci numbers is the good old Fibonacci retracement. So we start with a major low on the chart, going to a major high, and it draws retracements back in the direction of the movement. So for example this is what’s called our impulse move. From a low to a high, and then it draws these retracement levels. This is the basic stuff. Alright, and that’s basically what percentage of the move the market then comes back down.
We’re going to combine 2 different Fibonacci strategies on 2 different time intervals. So getting a little fancy there. You’ll need to make sure you have Fibonacci trading software on your charting platform. We did this on the big scale, and these lines are going to stay here. Now basically Fibonacci levels, I just trade as support resistance. Depending on which side of the market trading, they are either support or resistance. Let’s take that off, and actually no let’s move forward a little bit.
FIBONACCI FOREX TUTORIAL
I’ll just show you what happens here in the future, and just to demonstrate you that yes these levels really do come into play, and so we see that the market came down to this level, and then it just really found support there for quite a while. And then it broke down, went down to the next level. Then went down to the next level.
These support levels, these turned out to be support levels, they really are providing places where the market is looking, people are watching this, lot of people trade a 60 minute chart on the Euro or US dollar. And so kind of has a self-fulfilling prophecy, and a lot of people use these retracement levels.
Now let’s move beyond that. We have our 5 minute chart here, let’s look for some kind of a trending pattern. What we want is some kind of move where we can draw levels for Forex Fibonacci trading. We’re going to do 2 different things here.
FIBONACCI EXTENSIONS AND FIBONACCI RETRACEMENTS
- First of all, as you see we’ve already changed the time intervals, this is the energy of scale. We are looking at the same market, but on a different scale, 60 minute down to a 5 minute.
- The 2nd thing we are going to do is we are going to use a different Fibonacci technique. So now instead of Fibonacci retracements, we are going to do the Fibonacci extension. So now we do it from this high to that low, there’s your impulse move, okay again impulse move, and then we are going to come back up here to this high.
The Fibonacci extension is a 3 point drawing tool. We’ll be looking for levels above. Now we are looking for levels below. In other words, really Fibonacci extension is often used for profit targets. So let’s take a look and see what we got here, and there you go. So you’ll see that it’s put in this level here. That’s your 100% move. It’s called a measured move, and then 150%. Alright, now when I went to a 100%, notice, actually first of all notice couple things.
USING MULTIPLE TIME FRAMES FOR YOUR FIBONACCI FOREX STRATEGY
What are these horizontal lines here? Well those are the lines that we drew from our 60 minute chart. They are still on there. So if I go back, you see the blue line there. They are still on there, they are still on there. Alright now come back here. Messing up my scaling.
The point is where did we get our impulse move, there is our impulse move and then it draws levels into the future for targets. There’s a down move, and we’re looking to go short, and we are looking for profit targets, and again support resistance but notice that the market responded to this Fibonacci trading strategy.
That’s the level we drew on our 5 minute chart. The Fibonacci extensions. And these lines, they go before that, that’s the one we drew from our 60 minute chart, the retracements. so you’ll see that indeed the market kind of got through that level a little bit but then it came back and acknowledged it. Retraced to it. Then again same thing happens here at the 100% level. It goes through it but then it comes back and acknowledges it, and you’ll find that a lot.
ADVANCED APPLICATION OF FIBONACCI EXTENSTIONS
What’s really interesting and this is really kind of the point of this particular lesson is that we continue on down. And now we put in our wave 7 and a failed 9 here. But what happens, we have a cluster, we have a cluster of, you can see a black and red line.
They’re very close together but I think you can see those. From our extension on the 5 minute chart, we’ve got a 150% extension, and that’s the black line. Then we’ve got the red line from the 60 minute chart Fibonacci retracement and that creates a cluster. And there the market really finds tremendous support, it comes down to it, bounces off, comes down to it and then bounces back up again. S
That creates a Fibonacci cluster, which is one of the best Fibonacci Forex trading strategies that work. Let’s see what else happens here, just move it forward a little bit. It comes back and look at that, it’s again 1, 2, 3, 4. Really haven’t troubled again through that isn’t it. And as we go through, oh it finally makes a false breakout. So we finally get a breakup but it’s a false one. That goes right back up to the measured with the 100% level.
Fibonacci clusters provide an important Fibonacci Forex strategy.
Think of them as magnets. Most people treat them as the market, or well the alliance repelling the market. When the market gets there, it pushes it away. Changes the polarity of the magnet. So it actually will, the market will go there and the reason is this is not any kind of you know electromagnetic dynamics going out. It’s just purely the fact that a lot of people use these techniques and they have a self-fulfilling prophecy because these are the levels where masses of market participants are looking to buy and sell.
That is a way of combining 2 different types of Fibonacci techniques, 2 different timeframes and the reason the clusters work and let me finish with this, the reason that clusters work is because you’ll have one group of traders for example using a 60 minute chart, and they’ll draw those Fibonacci retracements.
THE LOGIC BEHIND THE FIBONACCI CLUSTERS
What makes Fibonacci Forex trading strategies that work with these clusters? You’ll have another group of traders maybe using 5 minute chart, and they’ll draw those Fibonacci extensions. So the clusters don’t work because there’s 2 lines on the chart. Wow. Now the lines mean nothing. Nothing on your chart makes the market do anything.
It’s what those levels represent. And what they represent are what masses and masses of traders around the world are seeing and therefore once they see it, they respond to it. They buy off of it. They short off of it. They take profits into it. And so when you got clusters, it’s just that many more market participants and that’s the reason that it actually works. That’s the market logic to it. So it’s no magic to it. It’s actually very very very simple and very logical.
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