Fibonacci is undoubted, a very reliable trading system, according to Grurus of trading. In this article, I am going to review each and every corner of it.
I have the curiosity to know:-
Whether or not it is a myth.!
Do we have applicability tools in this regard?
Let’s discuss it in detail.
Fibo Numbers the natural one!
Firstly, you must be inculcated that Fibo is a series of numbers, the first two numbers are 0 and 1 and for getting next to, you just add up the previous two numbers.
Subsequently, you will get; 1,1,2,3,5,8,13,21,34,55 and so on
Noteworthy, the beauty of fibo is that every time when you divide the two numbers especially the larger one like 34/21 or 55/34.
You will get a percentage that is 1.618 or 61.8%. It is a golden ratio.
Decisive Turning point!
We have strongly believed that this ratio is a turning point. It means the market could twist and change its direction around these numbers.
In view of this, it is a point that takes into account by every trader.
Regardless, big institutional traders like banks or individual retail traders like you and me.
Seemingly, People who believe in Fibo undoubtedly, denounce that fibo sequence is a natural sequence. One could find this sequence anywhere from themselves to plant- to- population to galaxies.
Ultimately it should have been applied in Forex trading as well.
Applicability in Fx trading:
By now we have in view that Fibo numbers are natural and having much consideration.
In view of this we now, need to incorporate this into our trading system.
For the reason that you just laid down some rules.
SOPs (standard operating procedures )
- SEE THE BIGGER PICTURE.
- LOOK LEFT.
- BELIEVE ON FIBO CYCLE.
- INCORPORATE SOME ADDITIONAL NUMBERS.
- PUT ORDER IN PENDING AND NOT IMMEDIATE EXECUTION
- ALWAYS USE TAKE PROFIT AND STOP LOSS AND NEVER AMEND THOSE.
- STICK WITH ONLY “ONE” TIME FRAME
Let’s apply these SOPs in the real world. with a live chat.
Seeing Bigger Picture&Look left
So below is the live chart of Eur/Usd. as on the 19th of November, 2019. For the bigger picture, I have chosen a daily chart, you may choose any time frame.
Hence you have to see look left and identify from where the downtrend starting momentum, see the below chart where you could point out the lower high and lower low series.
For the reason that you have to point out the sequence of lower highs and lower low by looking left like this:-
As you have seen in the above chart, market-making lower high and lower low
Thus we may say! it is a downtrend Please note down the highlighter points, in which there is a bounce (in a downtrend ) subsequently called lower high.
This is also a Fibo cycle, a cycle of Downtrend. But what happened the most lower high.
Shifting from downward to upward
Almost broken out the previous lower high and afterward, it is going to have another cycle (expect to have).
That is the uptrend cycle where we expect a series of Higher High and Higher low.
Time to Put Your Fibo retracement Tool
Thereafter time to fix your fibo tool. For this, you need to have only the FIBO RETRACEMENT. LIKE THIS:-
Target to Buy in an uptrend
As a result, draw fibo from the low to the high and put a pending order on a 61.8% retracement ratio.
Consequently, this is your target for buying. Now you need to have your targets and stop loss.
As far as targeting is concerned you need to inverse your fib retracement from high ( the starting point) to the low. Like this:-
Take Profit Areas!
Noteworthy, you may choose your target either. 88.6 ( this is not the by-default number you can put it by right-clicking adding these numbers).
Insertion of extra Numbers
So much so you can choose your target. 121/141/161 %. Please take into account that your target must be keeping in view the risk-reward ratio.
Finally, you have to choose the stop loss. it should be a logical point.
where your all assumptions deem null and void.
To me it is about 88.6 percent for this you have to delete fibo.
Up to downward and again drawing from low to high like this.
What to do just put pending order and wait.
Please note down here your risk is about (100-61.8) 38.2 percent. Whereas your reward is beyond this risk which is fairly a good risk-reward ratio.
Keep practice this and hold this strategy for at least a quarter in order to get a good glimpse.
I hope the above said live example will give you a better view of fibo and its applicability.