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 pip,
we should take an entry based on signal after 0.382. There is no requirement for price to necessarily retrace to 0.50 or 0.618 level.
Regards,
Edward
Hello Edward,
I have question about this 3rd rule.
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".
Q: What if candle touch 38.2 and close above it and next 1 or 2 candle give us entry signal with close below 5wma, Can we take this entry or we shall wait for retracement again for 50.0 or 61.8 level?
Thank you,
pip
Hello Edward,
I am a question boy but i want to go deep in any any strategy.
If candle touch 38.2 and close above it then turned down below 5WMA line without touching next fibo level, is it valid entry or we should wait for next fibo level to be touch.
Regards
fasi
Hello Edward,
Here is my one more question, What if retracing candle doesn't go above 5 WMA and we dont get any candle above WMA.
Is it must for retracement candle to go above WMA and then any candle close below it for entry.
Regards
Hi guys,
if very next candle after AB wave take retracement from 38.2 and close below 5 WMA, that's a valid signal to open a trade.
@fasi: your entry is correct. (There was another, smaller wave starting from the same point A on your chart, but may be you saw it too, just missed).
Regards,
Edward
Hello Edward,
Here is my chart for my Eur/Usd m15 trade please tell me is that okay entry or i made some mistake.
Green line is 50 SMA
White line is 5 WMA
Regards
fasi
Hello,
Please tell me what if very next candle after AB wave take retracement from 38.2 and close below 5 WMA, shall i make entry on new candle opening?
That's absolutely true,
thank you for your comment.
Happy trading!
Edward
I tried using pivots S/R and confirmation. So when my fib levels matches the S/R the changes of hit rate could be 90percent.
Tks a lot Edward,
miraclegirl
Hi Miraclegirl,
Both levels 0.382 and 0.50 are equally strong and provide a reliable signal.
If to compare Fib levels, we can say the following:
- a retracement to 0.382 followed by an immediate reversal indicates a very strong trend, which isn't looking to pause.
- a retracement to 0.50 followed by a reversal suggests a continuation of a trend at a normal pace.
- a retracement to 0.618 is considered to give away a weakening of a trend, although there is no reason to reverse a trade just yet.
5 WMA plays a special role - it's a filter that adds no more than simply a piece of mind when taking trades: it allows to time entries and bring in the discipline into trading, and with it achieves a second main goal - it filters a certain portion bad trades.
At the same time, I should stress that Fib levels are sufficient by themselves, while 5 WMA is added by for the resons described above.
For this strategy we set a target at 1.618 Fibonacci level, although if you feel you'd be rather exiting earlier, you can certainly use the close on the opposite side of the WMA.
Best regards,
Edward
Hello Edward.
me again!Just wondering if i understood it correctly that while in trade if any candle closes on the opposite side of 5WMA,we can exit?
Miraclegirl
hello Edward,
hope u r doing gr8.
Sorry one more question, what is the difference if price retraces to 38.3 level or 50.0 level,does a pullback to 50 level mean more reliable signal?In this case, if price crosses 38.5 but respects 50 level,can we consider this setup valid?
I also wonder abt the role of 5WMA ,are the fib levels by themselves nt sufficient since lot of traders use them?why do we need moving average?is it an additional filter?
Miraclegirl
Hi Remlad,
The difference in between the two would be insignificant.
9 or 10 WMA would simply require a slightly deeper pullback, which is more desired when dealing with larger time frames.
Best regards,
Edward
Good morrow Edward, thank you for taking the pains to help us in our education of forex. Of course it is no small fate. May you be rewarded abundantly.
I have been trading this system in conjunction with trend lines ( mainly on 4 hour charts using the 5 WMA filter) and the results have been impressive. I was just wondering why you feel 9 or 10 WMA is better on longer time frames. This is no challenge,it is more for my own development.
Have a serene day.
Remlad
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