Complex trading system #5 (Fibonacci trading)

I just want to add something I forgot in my last post:

If you enter a trade and there is a Pivot-Level (PP, R1, R2, R3, S1, S2, S3) a little (about depending on currency pair and timeframe (about 10 pips for EURUSD, 5min timeframe)) below (buy)/above (sell) the 0.618 retracement line set your SL not above (downtrend) / below (uptrend) the 0.618 Fibonacci retracement level, but 4-5 pips + spread above (downtrend) / below (uptrend) the Pivot-Level.
This is because price will move to Pivot and bounce back again (descibed here: http://forex-strategies-revealed.com/scalping/1minute-pivot-point-scalpi...). The same is with other major support and resistance levels. So if price is not able to break through this level it usually goes in the other direction again after some sideways movement and you will have a winning instead of a losing trade. If price breakes through this level you still have your SL, so you won't lose too much.

Regards

Philipp

@ H.B: The Fibos should be the same at every trading platform, so I don't understand why you can't use them. These levels should appear as horizontal lines when you add the retracement to your chart.
So after you added the retracement to your chart you should see these lines. Now you check at which price they are, and above/below this level you set your Stop-Loss/Take Profit, according to the strategy.
Sorry if I misunderstood your question, but this is the answer to what I thought you mean.

Now I have another idea to filter bad trades:
Just look at higher timeframes and check in which direction the pair you want to trade moves and only open trades in the direction of the trend on the higher timeframe. You could also check on the next two higher timeframes available on your platform, (ie. if you trade 5 min you check trend on 15 min and 30 min (Metatrader)).

Regards

Philipp

I use FXCM my Fibs

show from
0.000
0.328
0.500
0.618
1.618

I cannot use 0.618 as stop loss and 1.618 as target or exit please advice?

H.B

Beautifully written, Phillip

This approach should be used not just for this trading system, but for majority of trading systems. Thank you for highlighting this topic!

Regards,
Edward

I thought about some improvements to reduce losing trades:

1. If your entry point is close (5-10, depending on the pair you trade) to any Pivot-Level (PP, R1, S1, R2, S2, R3, S3) better not enter, because price often bounces off these levels. Pivot-Levels can be found at http://www.actionforex.com/technical-analysis/pivot-points/pivot-points-... or you can use my indicator I posted here: http://forex-strategies-revealed.com/scalping/1minute-pivot-point-scalpi....

2. The same is with major support/resistance. These levels can be found easily by drawing horizontal lines at higher timeframes. If price has to break support/resistance to become profitable you better not take this entry.

3. If there is a major news release close (5 min prior - 5 min after) to the time you want to enter also do better not enter, because some news have a high impact (the red ones at http://www.forexfactory.com/calendar.php) and will move price quite a few pips (sometimes about 100 pips, depending on news and currency pair) and you will get stopped out if price moves against you, although in most cases price comes back (but not always, so you might end up with a minus of 100 or more pips if you decide to sit out this movement).

So from my point of view the reward is not worth the risk.

Regards

Philipp

This system works well with M15 TF.

In other words, you can call it a top of the price wave and the bottom of the price wave.

Regards,
Edward

HI,i am a new trader. pls can i know it at all, cause of names you mention above. how do i start learning now. i need to understand it with your experience. q1.what is swing high,swing low?

Thank you, Adam.

Yes, that's the one you need in MT4 - LWMA (Linear Weighted Moving Average).

Regards,
Edward

I am new to your site. I would just like to say I love it and it is helping me alot.
I have a question for the strategy. I use the FXCM trading station and I don't see that it offers A WMA but it offers a LWMA
(linear Weighted moving Average) can I use that instead.

Thanks
Adam
Canada

Oke thanks.

Continual monitoring is not an easy job. So to take a pause during opening US markets and take a quick lunch is not a bad idea ;-)

regards

Dennis

Thank you, Dennis

Regarding the beginning of a trading day, yes, the market could be volatile. However, if trend direction is very obvious, there will be not much indecision and hesitation once the session is open.
Regarding 12 and 12:30 gap, same is true. Still, you have the point about risks during the market opening minutes, so it would be wise to pause during the first half hour of the session, especially when we deal with moving averages and support/resistance levels.

Best regards,
Edward

Hi Edward,

I'm using this great trading strategy on the 5 min. time frame. Thnks for sharing this system.

I'm start to trade ad 8.30(GMT)Because market could be very volatile first 30 min. Is it also wise to do that when US market opens?
So to stop trading at 12.00(GMT) and start again at 12:30(GMT)?

thanks

Best regards

Dennis

Of course, it makes sense. Exiting on the hit/test of BB mid line is not an option, as it does provide support/resistance to the price. With BB one should wait for the candle to breach the mid line and actually close on the other side of it to consider exiting.

Regards,
Edward

I think between the various comments on this board we can add some further confidence to this strategy! Team work is great!!

At the risk of turning the strategy into something over complicated which goes against the grain for me personally (as I like simple), could we not add one further element to the check. If it looks like things are going against we:

1. Hold until it meets the mid BB line (as above)
2. And that RSI is > 50 (long) or < 50 (short)

It is just that in my experience (limted!) the mid BB often appears to be a resistance level in itself and typically only penetrates that level if the RSI is also in support of it. I guess it would be a shame to exit the second the mid BB line is hit only to find it was actually a resistance level and then did develop as we originally thought.

Make any sense - or would everybody just exit once it hits the mid BB and cut losses?