Let me walk you thru something that confused me for a protracted, very long time…
The Fibonacci.
It is available in so many various forms, right?
You’ve gotten the Fibonacci fan…
The Fibonacci wedge…
(yeah I’m undecided how you can plot that one accurately!)
The Fibonacci Speed Resistance Arc…
And possibly a helluva lot more Fibonacci special moves and shapes for trading on the market which I still don’t know!
But… what if I told you, you simply must deal with the Fibonacci tool that matters?
And what in the event you dedicated a few of your time to mastering it to the best level?
Pretty exciting results could await, right?
Well, that’s what I’ll teach you today!
An entire masterclass on how you can use Fibonacci retracement…
It looks so clean on the chart, don’t you agree?
So, here’s a listing of what you’ll learn today…
- The way to use the Fibonacci retracement as a superpower to enhance your current trading strategy
- How you need to use the Fibonacci retracement to identify trading setups systematically and consistently
- The “secret” option to use the Fibonacci retracement to gauge market strength and weakness
- A fool-proof method for selecting which Fibonacci levels to trade for pullback trading
- The key to timing and managing explosive breakout trades with the Fibonacci retracement
- The way to trade Fibonacci retracement on range markets so that you simply never find yourself on the mistaken side of the chart
A reasonably straight-to-the-point guide, then!
And by the way in which…
I suggest you read these guides first, just to arrange yourself before we start on this one:
The Essential Guide To Fibonacci Trading
The way to Draw Fibonacci Retracement: A Step-by-Step Guide for Traders
Are you ready?
Then let’s start!
How To Use Fibonacci Retracement To Improve Your Trading Plan Immediately
Here’s how that is going to go…
I need to make sure that that while you finish this guide, your trading plan remains to be intact.
No big upheavals, no huge modifications.
But how do I ensure this?
It’s Easy.
You begin by checking whether or not the Fibonacci retracement is for you!
So, this tool is for you in the event you’re a…
Price motion trader
Whether you trade the 1-hour or the day by day timeframe, it doesn’t matter.
When you can analyze trends and areas of values freed from indicators…
And give you the option to discover swing highs and lows…
Then, boy, you’re going to like knowing how you can use Fibonacci retracement!
When you’re still having a tough time identifying those, you’ll be able to at all times check this out later, too.
OK, next, Fibonacci retracement might suit you in the event you’re the kind of trader who…
Only uses minimal indicators
If so, then this masterclass is certainly for you.
Imagine having indicators in your chart…
After which having so as to add Fibonacci retracements…
Err, it goes without saying – that chart looks ridiculously busy!
You’d be right in considering there’s an excessive amount of happening.
So if you desire to use the Fibonacci retracement, use minimal indicators and keep your charts easy.
Alright, now that you simply understand whether that is for you or not… where does the Fibonacci retracement actually are available?
How can it improve your trading plan?
The way to use Fibonacci retracement to have killer-accuracy trading setups
Spot a trending market?
Easy, wait for a price rejection on the 38.2% retracement!
How a few ranging market?
Only deal with the 78.6% level buildup and avoid the center!
(I’ll talk more about this later)
You see, the Fibonacci retracement is a fairly versatile tool in any market condition!
Because of this in any market condition, you may have a setup.
Is smart?
Now don’t worry, my friend!
This section is only a taste of what’s to return, as I’ll share with you complete strategies that relate to those setups.
Next up…
One other option to understand how using Fibonacci retracement can improve your trading plan is that this:
You’ll give you the option to accurately determine how you must manage your trade.
OK, I hear your sensible questions…
“What?! Using the Fibonacci retracement to administer your trade?”
“How can that be?”
Don’t worry, my friend.
I’ll spill all my secrets in the subsequent section.
The way to use Fibonacci retracement to gauge the strength of any market
Here’s a fact you’re probably conversant in…
Not all trends are equal.
Heck, not even all ranges are equal!
There are clean trends….
And there are choppy ones…
So now the query is…
How do you understand how strong or weak the breakout is before the breakout?
Interesting query, right?
To reply this, there are three “secrets” to contemplate:
- Increasing trend strength
- Decreasing trend strength
- Increasing range breakout
Let me explain…
Increasing trend strength
To place it in easy terms, we would like to know if the prevailing trend is getting stronger.
The important thing here is to take a look at the pullbacks in an existing trend and check out to measure how far they’ve retraced…
If the last 2-3 pullbacks sustained above the 38.2% level…
…then it mainly shows that the trend is healthy or, is about to get even stronger!
But there’s the opposite side of the coin, right?…
Decreasing trend strength
If the last 2-3 pullbacks have gotten steeper by always touching the 61.8% area…
…then the worth tells us that the trend is getting weaker because the pullbacks get steeper.
Make sense?
OK, how about range markets?…
Increasing range breakout
Now, for all you understand, a spread market can last for months and even years!
It may possibly keep chopping up and down, making false breakouts!
So how do you understand when it’s about to interrupt out?
Well, the trick here is first to plot your Fibonacci retracement within the range…
Then wait for a flag pattern to form above the 23.6% level or below the 78.6% level (depending on the way you plot the Fibonacci retracement).
Here’s what I mean…
What exactly does this imply?
It signifies that if the worth forms a flag pattern and sustains above the 23.6% level, for instance, buyers are beginning to “construct up” right below resistance…
…which is usually an indication of strength!…
And the identical principle applies to sellers as well…
But overall, the underside line is that this:
You must check how the worth reacts to certain levels of the Fibonacci retracement.
Why?
…so that you may determine the subsequent potential move within the markets!
Make sense?
Well, take just a few moments to look over the charts and explanations again.
After letting it sink in, you’ll probably be wondering…
“Okay, but how can we actually trade this?”
“What’s the strategy?”
“How do I exploit Fibonacci retracement using these concepts?”
They usually’re great questions!
In the subsequent two sections…
It’s time to get all the way down to the nitty-gritty details.
Keep reading!
The way to use Fibonacci retracement to trade and manage pullbacks within the markets
So, the right “season” to capture pullback trades is that this:
When the worth rejects across the 50.0% and 61.8% area…
This type of motion is strictly what you’re in search of.
Recall that if the worth is rejected all the way down to that area, the trend is potentially weakening…
But, what must you do?
You are taking your profits before the area of resistance…
A pleasant, clean, and straightforward swing trading setup!
Are you able to see that it really works in principle?
But how does it work with real charts?
Let’s take a look at how you can execute this setup step-by-step…
Step #1: Discover a long-term uptrend
“Duh, after all, we want an uptrend, any textbook can let you know…”
Yes, it could appear obvious…
But the rationale why I’m pointing this out is that it’s essential to know “when” you must use the Fibonacci retracement!
Picking the correct moment is crucial for this setup.
To help, a long-term moving average, akin to the 200-MA would help…
198, 211, 230-period…
It doesn’t matter!
What matters is that you simply’re using a long-term moving average.
So, if the present price is above the long-term moving average, you then can move on to the subsequent step…
Step #2: Wait for the worth to retrace below 50.0% Fibonacci retracement
That is what you’ve been waiting for.
You wish the market to return to our area and lead it right into a trap down below the 50.0% level…
(P.S. If the worth closes lower than 61.8%, then there’s a likelihood that the trend is reversing already.)
Alright so now they’re in play…
Step #3: Wait for a price rejection to enter the trade
Able to spring the trap?
Great, because what it’s essential to search for next is for the worth to shut back above 50.0%…
Then, enter at the subsequent candle open!
For stop loss, you’ll be able to simply subtract 1 ATR below the lows…
All good thus far?
Well, now that it’s in place – how do you manage the trade?
Let’s have a look…
Step #4: Exit at the closest resistance area
I live by the next golden rule:
“All the time place your stops and take profits reasonably.”
In brief, don’t be too ambitious and greedy along with your risk to reward!
It’s precisely why you usually need to take profit before the realm of resistance…
Just there!
Now, after all, you’ve probably realized… This can be a cherry-picked chart.
Like all the pieces else, it isn’t a 100%-win rate, holy-grail strategy and there will probably be some losses.
But nevertheless, here’s what this setup looks like on the short side…
Alright!
Now, how about breakouts as a substitute of pullbacks?
Because, in the event you recall, there are only two ways to enter trades (certainly one of which I just shared with you).
It begs the query – how do you employ Fibonacci retracement on breakout trades?
Well, buckle up – as that’s exactly what I’m going to point out you!
The way to use Fibonacci retracement to capture and ride explosive breakouts within the markets
Here’s the excellent news…
When you’ve learned how you can capture breakouts, you don’t must pick between this and the pullback setup!
Why?
Well, each setups serve two different scenarios.
It means that you simply actually get two strategies so as to add to your arsenal!
So, how will you tell what makes this setup different from the last one?
Step #1: Discover the medium-term trend
That’s right, you desire to make sure that you’re looking at medium-term trends!
And the correct tool to make use of here?
Again, whether it’s 55 or 63-period, it doesn’t matter!
All that’s essential is that it’s a medium-term period.
Step #2: Wait for the worth to hover across the 38.2% levels
When you recall…
When the worth hovers around 38.2%, it means the market is showing signs of strength…
And it’s here, my friend, that you may see what makes this setup different!
As with pullbacks, I’m making the most of the trend’s weakness…
But with breakouts, I benefit from the trend’s strength and momentum!
Step #3: Wait for the worth to breakout above the Fibonacci retracement
In a nutshell…
You’re just about in search of a flag pattern breakout.
So, once it makes a robust candle breakout close…
You possibly can then enter at the subsequent candle open with stop loss 1 ATR subtracted from the closest low’s price…
Are you able to see what I mean?
Well, I’ve made that as specific as possible.
So, be at liberty to refer back to this guide again when you desire to implement this setup!
Step #3: Use a medium-term trailing stop loss to ride the trend
Remember the 50-period moving average?
Good.
Because as a substitute of adding another indicator to clutter our charts…
We are able to use the identical indicator to trail our stop loss!
It means that you simply won’t exit the trade until the worth closes below the 50-period moving average…
Make sense?
And once more, here’s what the setup looks like on the short side…
Alright then!
Now that I actually have shared with you how you can trade trends, how about range markets?
The way to use Fibonacci retracement in ranging markets to time breakouts with accuracy
I left this one for last.
Why?
Well, range markets may be difficult to trade, not least because they will expand and contract!…
Now the major query is:
How do you make sure that that you simply at all times find yourself trading on the correct side of the range?
Let’s discover…
Wait for the worth to hover below the 38.2% level
Principally, wait for a bear flag pattern to form below the 38.2% level (on this case, we’ll use a brief example)…
Pretty familiar, right?
It’s almost similar to the last setup, but we’re simply plotting the Fibonacci retracement within the highs and lows of the range.
To place it much more simply…
We’re attempting to time the breakout of the range with a flag pattern.
That’s right – we’re not here to fight against the range!
Once it makes a breakout and also you enter the trade…
…what’s next?
Use a 50-period moving average to trail your stop loss
OK, I can hear more great questions coming…
“50-period moving average again?”
“Why not the 20-period?”
“How in regards to the 10-period moving average?”
Well, you see…
Each time a price breaks out of a spread, you’ll never know the way strong or weak will the subsequent move be…
Anything can occur!…
So, to offer the market some room to seek out itself.
We’ll be using the 50-period moving average to trail your stop loss until the worth closes below it…
Rattling, what an enormous trade!
And there you go!
An entire trading strategy on how you can use Fibonacci retracement each for trending and ranging markets.
And never only that…
I’ve also shared with you the principles behind them.
Not only the “how” but in addition the “why,” which is crucial to know!
So, with that said…
Here’s a summary of what you’ve learned:
Conclusion
When used accurately and in an easy way…
Knowing how you can use Fibonacci retracement may be your all-in-one tool to trade trending and ranging markets.
And it’s exactly what I’ve shared with you today!
No complicated Fibonacci confluence, Elliot waves, or harmonic patterns.
Just plain price motion with the Fibonacci retracement.
So, here’s what you’ve learned today:
- The Fibonacci retracement will suit your trading plan like a glove in the event you’re a price motion trader and would love to maintain your charts clean
- The tool lets you have more efficient and clean trading setups across trending and ranging markets
- You possibly can gauge whether the trend is slowing or strengthening by how deep the worth retraces from the highs
- You possibly can trade pullbacks by waiting for the worth to reject beyond the 50.0% Fibonacci retracement level
- You possibly can trade breakouts by waiting for the worth to hover above the 38.2% retracement (or below 78.6%) after which breaking out of its flag pattern
- You possibly can trade range markets by waiting for the worth to hover above 38.2% (or below 78.6%)
Wow…
That’s a serious amount of information, right?
So, with all that said and done…
Do you think that you’ll make some tweaks on how you can use Fibonacci retracement?
If not, how so?
Share your thoughts within the comments below!