FREE FOREX STRATEGIES

Complex trading system #5 (Fibonacci trading)


Traders were asking to post some strategies that will work on smaller time frames.
Here is one very nice trading system that can be worth your attention.

When a trader chooses to use small time frames (like 10 min, 15 min, 30 min even 1 hour) risks to be wrong are always higher than with larger time frames.
Therefore, it is very important to have a really good Forex trading system that can advise on entries with high chances to win and what's more important it should be able to tell exactly where to exit without need to constantly monitor the price.
Note also, the more traders look at charts, the more they tend to have controversial feelings about the success of a current open trade...

With all this long introduction, it is only left to mention that this strategy will require from traders basic knowledge of use of Fibonacci tool.
What is Fibonacci tool and how to use it? Simply Google "forex fibonacci" phrase and you'll find a lot of information about it.

...This is probably the only reason we classified this trading system as Complex one, not every trader is comfortable with using Fibonacci studies in Forex.

Trading setup:
Time frame: any over 5 min and less than 3-4 hour.
Currency pairs: any.
Indicators: 5 WMA

Rules:

Look at the price waves. Find the most recent swing high and the most recent swing low = so called Fibonacci A swing and B swing.

Pull Fibonacci from A to B.
To know which direction to pull (up or down) simply look at the trend; if it is unclear, find appropriate AB swings and set Fibonacci in both directions.

Once set, wait and watch the retracement from AB swing to unfold.
During the retracement there are three conditions to be met in order to consider trading:
1. The price must touch 5 WMA.
2. The price must at least touch 0.382 Fibonacci retracement level.
3. The 0.618 Fibonacci retracement level must not fail. Here it means the price should not close below (uptrend) / above (downtrend) 0.618 retracement line. It can touch or poke it, but the level must withstand the "attack".

When all three criteria are met, enter once the candle is clearly closed above 5 WMA for Long entry, below - for Short.
Stop order is placed always 4-5 pips above (downtrend) / below (uptrend) the 0.618 Fibonacci retracement level.
Profit target is set to 1.618 Fibonacci expansion level derived from point A.

Fibonacci trading system


Fibonacci system Forex


Master your Fibonacci trading!


Edward Revy
and my best Forex Strategies Team
http://forex-strategies-revealed.com/

what is a WMA , i am only familiar with SMA ( simple moving average and exponential moving
averages EMA

Thanks

WMA stands for Weighted Moving Average.
The Weighted moving average is calculated by averaging the current value and the previous values over the given period together.

Regards,
Edward.

how to setup fibonachi ? in the picture .618 is higher than .382 and also 1.618 lower than .382 ?

To set up Fibonacci you need to find swings High and Low - AB on the picture above. Then you drag your Fibonacci tool, found on your trading platform, from A to B and get retracement and extension levels.

Level 0.382 indicates 38.2% retracement from point B where AB swing = 100%.
Level 0.618 indicates 61.8% retracement from point B.
Extension level of 1.618 stands for total of 161.8% progress starting from point A.

Try this website to learn more about Fibonacci trading.

Regards,
Edward

Hey Edward,

Thanks for the great strategy. It's simple and having a target is a great stress reducer when in a trade. I've found that sometimes if price does'nt quite reach 1.618 that it will often make it to at least 1.272. I've also seen that sometimes using different swings price will end up in the 38.2 and 61.8 range with both a sell and buy signal happening at the same time. I've seen the 5 wma trigger for both a buy and a sell while in the same range. Do you have any other way of filtering these trades or choosing wether to go with the long or short?

Thanks,
Dan

Hi Dan,

Yes, you are right, setting a target at 1.27 will increase your chances to profit in time but also reduce the amount of pips you earn.

You may add 20 EMA (any time frame) and trade only up when you are above 20 EMA and only down when below.

Also try 200 EMA (again any time frame). Same only up when above 200 EMA, only down when below.

If I get both buy and sell signals for Fibonacci setup I look at higher time frame to decide on preferred direction. In case there are no clues on the chart, I don't trade.

Regards,
Edward

Hello Edward

Thanks for another valuable lesson in Forex!

Just wondering if you would add to the trade (open a new position) if you get another fibonacci signal while in the middle of a trade?

Thanks Edward
Simon
Australia

Hi again

Sorry one more question...

Is it ok to trade if the swing high and swing low are the same bar?

Kind Regards
Simon