Advanced system #2 (Fibonacci trading)

Hi,
We actually look for those large swings that are over 100 pips to apply a new set of Fibs on our chart. Once we got 200 pips swing, that's a signal to reset Fibonacci.

Only when a swing is less than 100 pips we continue using old Fibonacci levels.
I hope this clarifies the strategy. If not, please do not hesitate to ask further questions.

Regards,
Edward.

Hello Edward,
Hope this day finds you doing well!

this is a really nice strategy.

Best Regards
Hany

CJA

Hello Edward,

a stop loss according to the last swings high or low (in simple words, a stop loss will be always just below the Fibonacci 0% line)

Edward is our stoploss is 100 Pip or be always just below the Fibonacci 0% line.

Also if we have a 200 Pip(No swing just wv with 200 pip) wave could we also draw Fibo on it and trade

Setting new Fibonacci lines on retracement of course makes sense only if the old Fibonacci levels 0.250 and 0.750 haven't been breached yet, e.g. the price still trades within those levels.

If so, there is one more trick to use, which suggests traders keep the old Fibonacci for a while.
It is used to recognize a true trend reversal from a large pullback.

How could we recogniz a true trend reversal from a large pullback.

Thx for sharing

Best Regards

Regards

Hany

Hi Hany,

I like to see a Stop loss below Fibonacci 0% line, but at times, when this line is quite far away and I have recently opened a trade and haven't made profits yet, I opt for an alternative which is roughly 100 pips stop.

If you have a complete wave with 200 pips, you can definitely trade it. I think by "no swing just wave" you mean a complete up and down move, but without a highest high/lowest low as a result of two candles having same high/low values at top/bottom. Is that right or did you mean something else?

Let's now return to your screenshot to find out about pullbacks, reversals and old/new Fibonacci:

I've made a smaller pic for this page;
the large sreenshot is here:
GBP/USD 4 hour Fibs

Usually, if we have a large wave, for example, 300 pips or more, a pullback can also be large, which in case of being over 100 pips requires a new Fibonacci setup.

In order to confirm a trend reversal we need to use larger wave and therefore will rely on old Fibonacci...

That's now the case with the screen shot above.
In order for a trend reversal to be confirmed we have to see price trading above 75.00 orange line of AB Fibonacci.

Currently we can see that our old AB Fibonacci setup on the pic above haven't fulfilled the first requirement yet, which is to register in a "must channel". Otherwise, despite new BC Fibs I would Sell on the open of Candle #6 (because whole Candle #5 is outside 25.0 orange line).

Our new BC Fibonacci setup, however, is valid since Candle #3 has registered in a new "must channel". Therefore, we will take trades according to our new Fibs. I would be very cautious about trading Up because we are still haven't seen a decent AB wave retracement and our green colored moving average on the screen shot above suggests that we are in a downtrend. But even if I did I would consider old Fibonacci lines and until I see a full candle closing outside 75.00 orange line I would treat the move as a large pullback on old AB Fibonacci and keep my stops tight.
So, a trend reversal in this case is confirmed when a full candle is closed above 75.0 of old AB Fibonacci.

I hope my reply is somewhat readable and not very confusing, but if not, please do not hesitate to ask questions.

Regards,
Edward.

CJA

Dear Edward

Perfect i get it all now.

ques.?:)

Currently we can see that our old AB Fibonacci setup on the pic above haven't fulfilled the first requirement yet, which is to register in a "must channel". Otherwise, despite new BC Fibs I would Sell on the open of Candle #6 (because whole Candle #5 is outside 25.0 orange line).

Why you will Sell and you can see that our old AB Fibonacci setup on the pic above haven't fulfilled the first requirement yet , which is to register in a "must channel".

and we will go with the trade if a whole candle is closed outside the 0.25 red fibo and we will close the trade if a whole candle closed outside the 0.75 red fibo cos there is a percentage of trend reversal now.

Thx Edward for your time and for your perfect explaination.

Best Regards
Hany

Hi Hany,

That's why I said "otherwise" :). The way it currently is of course no Sell orders on Candle #6 should be open.

And that's right. We should focus in this case on the red Fibo and Sell below 25.0 and be prepare to exit if a whole candle closes outside 75.0 red Fibo.

Best regards,
Edward.

CJA

Hi Edward.

Sorry for all of this que.?
You said in this post (Submitted by Edward Revy on July 17, 2007 - 15:39.)
One more idea to try out (which will guarantee an early entry but won't guarantee it to be always safe) is:
entering only at 61.8% Fibonacci retracement level with the stop at 75% , you mean that we could go long when a full candle (including shadows) is closed above 0.618 Fibonacci retracement and 0.25 will be our stop , aand we go short when a full candle (including shadows) is closed Below 0.382 Fibonacci retracement and 0.75 will be our stop.
Is this right?
also could we draw Fibonacci from any candle on the wave(Pic 2) or we must choose a good top and bottom (Pic 1)?you will find the pic in the fourm (http://forex-strategies-revealed.com/node/109)

Best Regards
Hany

Hi Hany,

Well, with that entry method at 61.8% Fibs ONLY, we don't wait for a full candle to close above 61.8%, we go immediately on the touch of 61.8 level. This level is the deepest one that can be touched during a retracement in a Healthy trend. But there is also a 75% level - the last one. Touching that level puts in question the health of the trend. Going below 75% - could be either a whipsaw or a potential trend change.

This type of trading where you enter on the touch of 61.8% Fibo level with a stop at 75% is quite risky and more or less belongs to the category of guess games. But, since we set a tight stop the risks are worth taking. The only requirement here is to not be afraid to lose and also trade small lots.

Regarding the pictures, we have to choose the real top and bottom in the swing high and low. Therefore, setup on pic1 is correct, pic2 - wrong.

Best regards,
Edward