A Unique and Easy Fibonacci FX Strategy

Fibonacci is one of the most commonly used terms in Forex trading. The tool is extremely popular and many use it for a variety of tasks such support and resistance (S&R), entries and exits.

Traders also encounter problems when using the “Fib” tool, as it also called on occasion. They ask themselves questions such as:
• Where do I place the Fibonacci?
• Where do I place the stop loss?
• Can I enter a shallow or deep Fib?

Although I have taught a couple of webinars on Fibonacci with Admiral Markets, I do realize that using the Fib for trading purposes can be quite complicated for beginning and intermediate traders. In those webinars I recommend placing the Fib on the swing high and swing low, but even this tip can lead to confusion.

The solution is using the Fib tool non-discretionarily. But how? I will explain that in this blog post.

The first step for this Fibonacci strategy is that we must trade with the trend and only if there is a trend. Then with an uptrend, we search for the nearest bottom on the time frame that you trade. For downtrend you need to look for the nearest top.

Secondly, we take the Fibonacci from that top or bottom and bring it the nearest top or bottom or fractal (move it rightwards). From a top we draw it to next bottom. From a bottom we draw it to next top.

Thirdly, we wait for price to go to the 50% or 61.8% Fibonacci retracement level and show a candle stick pattern at the level(s) for entry. We place the stop loss above the swing high or swing low.

Fourthly, we exit the trade at the -61.8% Fibonacci target.

Fifthly, we do NOT (!) move the Fibonacci retracement tool unless we have hit the -61.8 target and not a moment earlier.

Sixth, once price hits the target and bounces at that level, we can move the Fibonacci tool from the Fibonacci retracement level (such as the 50/61.8) to the most recent swing high or swing low and we can repeat the above process.

The hidden advantage of using this technique is that you can NEVER ever use the Fib tool incorrectly or too early or too late.

Most traders lose pips when using the Fib because they place the Fib on a very small swing or they move the Fib way too early. Wrong!!

The method is crystal clear when you should move the Fib or not, and will remove these errors. Of course nothing will remove all losing trades.

What do you think of the method? It may seem simple at first, but you will soon see the power and value of the method.

Many green pips, Tarantula