A great Fibonacci trading strategy is to use Fibonacci Extensions to determine your exits. Whether you’re trading stocks, futures or Fibonacci Extensions Forex, this video can help you with your trading.
Enjoy this tutorial about a simple Fibonacci trading strategy intraday and also for swing trading to integrate with a good overall trading method.
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Welcome to this tutorial on Fibonacci Trading Strategy that helps you to find the best place to exit your trades using Fibonacci extensions. I often hear people struggling with where to get into their trades, I actually find that very easy. That’s actually one of my specialties and I’ll be happy to share that with you as well on another video.
But today’s video is about where to get out. In this one, I find is much more challenging for more traders, in fact even a lot of veteran traders that I talked to, and some who are retired say that they never really mastered exactly when to get out of a trade. So I am going to give you some help with that using Fibonacci extensions Forex, stocks and futures, and we’ll throw little else in there too.
USING FIBONACCI EXTENSIONS TO FIND EXCELLENT EXITS FOR YOUR TRADES
Wer’e going to use the Fibonacci extensions tool as our primary tool for determining where to get out. Now when you do this, actually let me go back here and turn that off, oops there we go, that’s great. Ok, so let’s talk about how to draw this thing correctly.
You can do it many different ways because Fibonacci projections are all relative but the most traditional way and the way that I personally like to do it as well is to take a low, the lowest low and as you start making an up move, then go from the lowest low to that high, and then down to the higher low. So what we are doing is we’re starting with a new impulse move, a reversal if you will. Because we’ve been going down for a long time.
FIBONACCI TRADING STRATEGY: HOW TO DRAW FIBONACCI EXTENSIONS
What we do is we use a three point drawing tool as you saw there. If you didn’t catch it, just review. You can rewind here. The beauty of video.The lowest low after a move down and then we go to the next high. Usually will be a little bit of a higher high than the previous swing high. It doesn’t necessarily have to be, but it is actually good if it is. And then the higher low, the first higher low of that reversal.
Those are the 3 points. 1, 2, 3. Then instead of measuring retracement levels for our Fibonacci trading strategy, which would be below this high, it actually draws levels above it. And so it is drawing targets. So now we are going long, we are looking for longs and we’re looking for potential profit targets. The price levels where we might want to take profits.
WHICH LEVELS WORK AND WHICH DON’T
Not every level is going to provide a place where the market stops and turns around and puts in a high or a wave, or a cycle, but a lot of them do. So the first one that we always look at, or that I look at is the 100%. That’s called the measured move. And it’s quite often considered an excellent Fibonacci trading strategy, but look this time, hey let’s just call what it is, the market didn’t even acknowledge it. It just sliced right through it, and pretended like it wasn’t even there.
it hesitates at the 150 but it really finds it’s high at the 200%. And what that literally means, the 200% means that from this level here, if we were to draw just this horizontal line from here and then go up, ok that’s your initial impulse move to the upside. So you take that and double it, and that would be your 200% move. 100% will be the same length of that low.
SIGNIFICANT SUPPORT RESISTANCE
That’s the place where we first get real significant resistance. Then it comes back down and where do we find our support? At the 150. So sure enough, these 2 levels worked quite nicely, goes back up to 200 and, it has a little trouble there. What’s happening is the market participants are aware of this high and are a little uncertain as to whether there’s going to be more buying traction. Because let’s face it, market already moved up 200% of the initial impulse move.
It’s a little harder for to continue going, the psychological, the mass psychology behind that is that people are just wondering if this is getting to be over bought now if there’s too many people already onboard, are there enough buyers to come in and continue the market to move up.
The market goes down 3 bars and then market decides, yup we believe it is. Again slices through 300 but now this is something that you’ll see often with support resistance levels. If it gets real aggressive like it does here, then it will kind of, and it has to be an aggressive move like this, at a very sharp angle. What’ll happen is it will often then kind of retrace a little bit or even just go sideways and pause.
IT DOESN’T ALWAYS WORK RIGHT AWAY, BUT 2 TIME’S A CHARM
The same thing that happened here very strong, a vertical move, and then the market comes back to acknowledge the 150. It sliced through it, comes back to it and acknowledge the 150. And again it’s an uncertainty thing of people saying wow there was a lot of energy there, may be too much. And then we come back up and we get up to, there we go, all the way back up to 500, and we put in a wave 7. Now that’s an extended move.
The difference between Fibonacci retracements and extensions are that Fibonacci retracements are generally considered entry points. Buy points, sell points, where you get in to the market. Whereas Fibonacci extensions like this, that are marking levels above whatever our price currently is on the hard right edge of the screen. Those are considered potential profit zones. Now they don’t work by themselves. You’ve got to put in other things with them.
HOW TO TIME YOUR ENTRIES AND EXITS WHEN USING FIBONACCI RETRACEMENTS AND EXTENSIONS
The other important thing when using a Fibonacci trading strategy is cycles. Because price alone, price levels, they are very important. As we’ve seen though sometimes they work, sometimes they don’t. They do work a lot. So they are important to see. But the other thing you absolutely critically need is time.
What I mean by that is there’s two axis on the chart. Over here we have price and that’s fine. And that’s what these Fibonacci extension lines are, is they are price levels. But that is only half the picture. The other half of the picture on a chart is what, it’s time. So we got price over there, let me move my chart up a little bit here, so you can see time. And down here, I mean it’s a two dimensional object right. So here we have time. Very few people actually talk much about time.
MY TIMING TOOL
If you’re interested in the timing tool I use, we are almost done here. We are already 9 minutes in this 10 minutes video. I’ll be happy to make that available to you. It’s more than I can share in 10 minutes and we keep all these videos to 10 minutes. But I have a free webinar, where I offer that and give you the indicator and how to use it and give you a nice, it’s about a 30 to 45 minute tutorial on how to use it. Setting up the indicator is really easy, works on any chart, any charting software, but how to trade it is a little more, it’s not hard but it’s not intuitive on how to do it. So I give you a tutorial and that’s all free.
So feel free to, just send me an email Barry@TopDogTrading.com, and I’ll send you information on when the next webinar is for that, if well if we are still offering it. You know these videos stay free or so. So by the time you see this video I may no longer be offering it. But send an email anyway to check it out.
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