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.

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Dear Edward,

I would like to thank you for assisting me in being able to properly comprehend the utilization of the Fibonnaci System. But I still have an enquiry with regards to what happens when the o.618 level is penetrated, do we simply wait until we find the new AB Swings and reverse the trade?...or do we simply exit the trade? ...A live example of this is on the HOURLY chart of the GBPUSD 18/08/2008 (A=1.8786; B=1.8514);WHEREAS THE O.618level =1.8683 HAS BEEN PENETRATED??
Thanking you in advance for all the time & effort you have put in helping others!
God Bless You,

Hi Agus,

Should work too. The key is to use indicators which you understand.
Regarding ADX, let me refer you to a simple yet good article at: Trading with ADX.


How to read ADX? I rather like to add EMA 10, EMA cross, make WMA 5 stronger..


Agus Setiawan

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.


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?


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

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.


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

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.


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?


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.


Hi again

Sorry one more question...

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

Kind Regards

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

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.


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?



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