Complex trading system #5 (Fibonacci trading)
Submitted by Edward Revy on June 30, 2007 - 13:27.
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.
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Hi Simon,
I may add another trading position if I get a signal, but only if my current trade is showing profits. Until I'm negative, at no circumstances will I add another position.
Yes, you can trade if both swing high and low belong to the same price bar.
Regards,
Edward
Hi Edward,
Thanks for the great website! Question: You said to enter ".. once the candle is clearly closed above 5 WMA for Long entry, below - for Short." On the yellow entry above, it looks like this condition was not met yet you still labeled it as an entry point. Can you please clarify?
Thanks!
JC
Hi JC,
I have marked a yellow entry point when the grey downside candle (the one that is located directly below purple "A" on the figure above) closed below 5 WMA. On the close of that candle I put my entry (I needed probably to shift it a bit on the picture to avoid confusion among readers, but if we enter on the close of the previous candle => e.g. open of the new one that's exactly how it's going to appear). Once I entered on a new candle, the price went against me and thus you see next green candle rising, by that time I was already in the trade.
Hope it clarifies things.
Regards,
Edward
Hi Edward,
One tricky question...
Assume price touches 5 WMA and retraces back to Fibbn. level 0.5 and closes below 5 WMA but not below 0.382 Fibbn.level... Do I still go SHORT ? (I'm above 0.382! level)
Thanks in advance
cK
Hi cK,
Yes, you can go short at that point, since all conditions are met:
1. Price touched 5 WMA.
2. Price retraced to at least 0.382, and in our case all the way to 0.5 Fib level.
3. Price closed below 5 WMA. So we go short. Was it above or below 0.382, we don't care anymore.
Regards,
Edward
great system with everything essential for success in the long run, clear entry and clear target and clear stop loss with positive odds in our favour!
thank you for sharing
Edward,
I am new to the site and very impressed with the systems presented, many thanks.
A question or two..
From your research, what is the percentage of trades that hit the target using this method?
Would this method be enhanced by the use of ADX as well?
Rob
Hi Rob,
At the time of trading with this strategy I haven't made much of statistical research, since I had no goals to present my strategies to public in the future...
Now my trading involves variety of methods, where it might be challenging to isolate statistics for a specific strategy.
So, I'd rather leave this entertaining part of testing and math to our enthusiastic Forex explorers :)
Adding ADX could be an interesting experiment. Since we know that ADX helps to decide on the type of strategy to be traded (trend-following or non-trend-following) depending whether the market is trending or ranging, we may definitely try it out here.
With ADX we'll be entering trades only when ADX readings exceed 20.
Regards,
Edward
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