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Chapter 10, Part IX. Using Fibonacci for placing orders. Page 3

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 17, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    2. When the market turns and makes initial swing after changing direction – the first retracement after that is usually deep – at least 0.618. Very often it could be “AB-CD” retracement, rather than just single legged retracement (AB and go…).

    Pipruit: So, what technique should be applied?​

    Commander in Pips: Well, because you’re still pipruit and newbie to Forex, the best technique for you is first one. But, you should apply a third technique as well to the most recognizable swings – that are obvious and everybody see them. Usually they are daily and higher time frame swings. Like those that are on our weekly chart #2 and 3.

    Pipruit: And does some method exist to estimate will W&R appear or not?​

    Commander in Pips: There is one, but it doesn’t cover all the possibilities, it just shows the scenario at which the appearance of W&R is probable. But stop licking pattern could appear and without this method. Anyway here is the rule:

    If market has upward/downward Fib extension target above/below the Resistance/Support level that you intend to use for enter Short/Long – appearance of stop licking and piercing of this level is very probable.

    Just look at the chart #4:


    Chart #4 EUR/USD Weekly
    [​IMG]

    Assume, that you still want to enter Short from 0.786 Resistance level at 1.4444. But also you see that market has 1.0 Fib extension target just above it – at 1.4559. So, here is logical to expect appearance of Wash&Rinse. For us it means, that we should enter the market after it will hit 1.0 extension target and not before it. So, we will apply third method for entering.

    Pipruit: Commander, that’s amazing! And could this scenario be applied at lower time frames?​

    Commander in Pips: Yes, I even say that it has to be. But the difference between the target and level should be used correspondingly. So, here is the difference about 100 pips between target and level. This is not much on weekly time frame. But such difference is absolutely unsuitable on, say, hourly chart. Other words, the difference should look logical in corresponding time frame – target and level should be in relatively tight range.

    Pipruit: Yes, this is obvious.​

    Commander in Pips: By the way, a bit earlier this has already has happened – look at how the market behaved around 0.618 Fib resistance. Here the market also has 1.0 extension target just above this level – and W&R has appeared…


    Chart #5 EUR/USD Weekly
    [​IMG]

    Pipruit: Commander, I just can say that this is a goldmine. This gives us a huge advantage compared to other participants. First, we will enter at a better price, second – many traders will decide, that this level has been broken already and will enter Long with placing stops below it. And “Boom” – their stops will be triggered and we will accelerate to the downside, in our favor…just outstanding.​
     
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