Fibonacci-based strategies: Use, mistakes, pitfalls
- Thread starter Arafx
- Start date
Paulina_wagner
Private, 1st Class
- Messages
- 42
remember that Fibonacci levels are subjective and can vary among traders. Don't blindly follow others' interpretations. Take the time to understand the concept and adapt it to your own trading strategy.
NatureGirl
Corporal
- Messages
- 87
its not jus bout fibonacci or any single indicator U shouldn rely on one indicator rather U should cross reference it with several others and its important that while many traders R lookin at the same chart and usin the same indicator the results R vary from one person to another
Right. Fibonacci levels can be interpreted and applied in different ways by different traders.
You make an excellent point. A more comprehensive understanding of the market is provided by the combination of many indicators.
If you are new to Fibs , Its a place to start.
Fibonacci Ratios with Pattern Recognition
By Larry Pesavento,
Fibonacci Ratios with Pattern Recognition
By Larry Pesavento,
Kelemeena
Private
- Messages
- 21
I have heard that there are quite profitable strategies based on Fibonacci levels. Therefore, I would also be glad if someone shared his experience of using this tool.It does not matter whether you use Fibonacci levels to determine entry points or to calculate take profit and stop loss levels. Any information will be useful.
Siuko
ZyraTrading.com Representative
- Messages
- 9
In my opinion, here are some strategies using Fibonacci that I occasionally include in my EAs:
Fibonacci Retracement Strategy:
Step 1: Identify a Trend
To use the Fibonacci retracement strategy, start by identifying a clear trend on the chart. This can be an uptrend (rising movement) or a downtrend (falling movement).
Step 2: Plot the Retracement Levels
Once the trend is identified, use the Fibonacci analysis tool to plot the retracement levels. Place the tool from the starting point of the trend (low point for an uptrend and high point for a downtrend) and stretch it to the end point of the trend (high point for an uptrend and low point for a downtrend).
Commonly used retracement levels are 38.2%, 50%, and 61.8%, but other levels such as 23.6% and 78.6% can also be used.
Step 3: Identify Potential Reversal Zones
After the retracement levels are plotted, observe the zones where the trend could correct or reverse. The retracement levels act as support zones (in an uptrend) or resistance zones (in a downtrend).
Step 4: Wait for Confirmation
Wait for confirmation of a trend reversal, such as a reversal candlestick pattern or an indicator signal, before entering a position. This can help avoid getting into a trade too early.
Fibonacci Extension Strategy:
Step 1: Identify an Ongoing Trend
To use the Fibonacci extension strategy, identify an ongoing trend on the chart. This can be an uptrend or a downtrend, depending on the current movement.
Step 2: Plot the Extension Levels
Use the Fibonacci analysis tool to plot the extension levels. Place the tool from the starting point of the trend (low point for an uptrend and high point for a downtrend) and stretch it to the end point of the trend (high point for an uptrend and low point for a downtrend).
Commonly used extension levels are 161.8%, 261.8%, 423.6%, and 61.8%, but other levels can also be used.
Step 3: Identify Potential Targets
The extension levels act as potential zones where the trend could reach its targets after a retracement. These levels can be used to determine exit points or take-profit levels.
Step 4: Confirm Additional Signals
As always, wait for confirmation of additional signals, such as trend reversal patterns or indicator signals, before making trading decisions based on the extension levels.
Fibonacci Cluster Strategy:
Step 1: Identify a Significant Trend or Movement
To use the Fibonacci cluster strategy, identify a significant trend or movement on the chart.
Step 2: Plot Multiple Fibonacci Analysis Tools
Use multiple Fibonacci analysis tools with different starting and ending points for the identified significant movement. This will create retracement and extension levels that overlap, forming cluster zones.
Step 3: Identify Confluence Zones
Fibonacci clusters are areas of strong confluence, where multiple retracement and extension levels converge. These zones are considered potential support or resistance areas.
Step 4: Use Additional Signals
Wait for confirmation of additional signals, such as trend reversals or indicator signals, before making trading decisions based on the cluster zones.
Combination with Other Indicators:
Another approach is to combine the Fibonacci analysis tool with other technical indicators, such as moving averages, trend lines, oscillators, etc. The combination of different tools can help strengthen the validity of Fibonacci levels and provide additional confirmations for trading decisions.
It is essential to remember that Fibonacci analysis is based on probabilities and is not a guarantee of success in every trade. Practice, experience, and proper risk management are also crucial for success with these strategies. It is recommended to test these strategies on a demo account before applying them in a real trading environment.
Fibonacci Retracement Strategy:
Step 1: Identify a Trend
To use the Fibonacci retracement strategy, start by identifying a clear trend on the chart. This can be an uptrend (rising movement) or a downtrend (falling movement).
Step 2: Plot the Retracement Levels
Once the trend is identified, use the Fibonacci analysis tool to plot the retracement levels. Place the tool from the starting point of the trend (low point for an uptrend and high point for a downtrend) and stretch it to the end point of the trend (high point for an uptrend and low point for a downtrend).
Commonly used retracement levels are 38.2%, 50%, and 61.8%, but other levels such as 23.6% and 78.6% can also be used.
Step 3: Identify Potential Reversal Zones
After the retracement levels are plotted, observe the zones where the trend could correct or reverse. The retracement levels act as support zones (in an uptrend) or resistance zones (in a downtrend).
Step 4: Wait for Confirmation
Wait for confirmation of a trend reversal, such as a reversal candlestick pattern or an indicator signal, before entering a position. This can help avoid getting into a trade too early.
Fibonacci Extension Strategy:
Step 1: Identify an Ongoing Trend
To use the Fibonacci extension strategy, identify an ongoing trend on the chart. This can be an uptrend or a downtrend, depending on the current movement.
Step 2: Plot the Extension Levels
Use the Fibonacci analysis tool to plot the extension levels. Place the tool from the starting point of the trend (low point for an uptrend and high point for a downtrend) and stretch it to the end point of the trend (high point for an uptrend and low point for a downtrend).
Commonly used extension levels are 161.8%, 261.8%, 423.6%, and 61.8%, but other levels can also be used.
Step 3: Identify Potential Targets
The extension levels act as potential zones where the trend could reach its targets after a retracement. These levels can be used to determine exit points or take-profit levels.
Step 4: Confirm Additional Signals
As always, wait for confirmation of additional signals, such as trend reversal patterns or indicator signals, before making trading decisions based on the extension levels.
Fibonacci Cluster Strategy:
Step 1: Identify a Significant Trend or Movement
To use the Fibonacci cluster strategy, identify a significant trend or movement on the chart.
Step 2: Plot Multiple Fibonacci Analysis Tools
Use multiple Fibonacci analysis tools with different starting and ending points for the identified significant movement. This will create retracement and extension levels that overlap, forming cluster zones.
Step 3: Identify Confluence Zones
Fibonacci clusters are areas of strong confluence, where multiple retracement and extension levels converge. These zones are considered potential support or resistance areas.
Step 4: Use Additional Signals
Wait for confirmation of additional signals, such as trend reversals or indicator signals, before making trading decisions based on the cluster zones.
Combination with Other Indicators:
Another approach is to combine the Fibonacci analysis tool with other technical indicators, such as moving averages, trend lines, oscillators, etc. The combination of different tools can help strengthen the validity of Fibonacci levels and provide additional confirmations for trading decisions.
It is essential to remember that Fibonacci analysis is based on probabilities and is not a guarantee of success in every trade. Practice, experience, and proper risk management are also crucial for success with these strategies. It is recommended to test these strategies on a demo account before applying them in a real trading environment.
