Price Action Fibonacci
Anais Wachowski
For this trade, no price action confirmation could be found on any of the time frames, so waiting for confirmation would have made you miss this one, which is absolutely ok, as long as you stay within the rules of your system.
Combine this style of trading/levels with price action bars and you have an invincible strategy. If you can wait for 1-2 setups per week and actually have the patience for price to come to you, this setup will serve you well.
A common question among Forex traders is whether Fibonacci retracement levels actually work and whether there is any benefit to using them. I can tell you without a doubt that they do work and they can be beneficial but only if used correctly.
First things first, in order to understand how we can benefit from these retracement levels we first have to know how to use the tool. For purposes of this lesson I will be using MetaTrader 4, however most Forex trading platforms will have a Fibonacci retracement tool built into the platform.
Notice how the 38.2, 50 and 61.8 Fibonacci levels line up with previous minor swing highs and lows. This gives us extra confidence that these are potential reaction levels where the market may reverse.
This is still a bit of a mystery. Fibonacci retracement levels have been around for a long time. The phenomena was originally discovered by an Italian mathematician by the name of Leonardo Fibonacci in the thirteenth century.
They were originally applied to everything from studies of the universe to defining the curvature of naturally occurring spirals, such as those found in snail shells and the pattern of seeds in flowering plants.
For this lesson just know that the most important levels are 23.6, 38.2, 50 and 61.8. Although not a true Fibonacci number, the 50% level is by far my favorite. Over the years I have found that the markets are most likely to react at this level.
The very best way to use the Fibonacci tool is as additional confirmation. Think of it as a second opinion. The first opinion, of course, being the price action levels you already have identified on your chart.
From what we already know about drawing support and resistance levels the following two levels are something we should already have on our chart. We can see that the market had traded between these two levels for some time and continues to react to them even today.
Once we draw our Fibonacci levels, it becomes immediately apparent that the 23.6 and 50 levels match up well with our price action levels we identified previously. This gives us greater confidence that any retracement to these levels should lead to an increase in demand and are therefore more likely to cause a reaction.
The effectiveness of this combination can be attributed to the fact that both the Fibonacci tool and price action as a trading strategy are widely used among Forex traders. Therefore the likelihood of a market respecting a confluent level becomes somewhat self-fulfilling.
The Price Action Pro Package is our complete trading solution for any professional price action / Fibonacci daytrader. It's the exact workspace we trade and use ourselves every day in the market. It comes 10 professional indicators, with chart templates for the daily, 15min/5min, 2000 tick chart, toolbar and for the market internals. All organized in a clear and logical order to get an excellent overview of the markets in different timeframes.
Use the chart buttons to turn things on/off very quickly or to place a buy or sell order. The trading statistics will show your trading results. No matter if you are a beginning or advanced PATS trader this indicator will make your trading easier. By using the signal plots it allows you to write your own PATS automated strategy
The opening range and initial balance are defined as the price range the market creates in the first 30 min and the first hour after the session open. These ranges are very important in the market and are used by traders to spot potential turning points and support and resistance levels. The TDU Initial Balance indicator draws all the important pre-market levels, opening range, and initial balance in realtime. When the market rallies once the initial balance is established any extensions are automatically drawn as these extensions often act as support & resistance levels.
Most Fibonacci traders are aware of the important 50%, 61.8%, 65%, and -23.6% are very important Fibonacci levels. Traders like Sam from TradeDevils, Tim from eminimind and David Halsey from eminiaddict based their entire trading strategies on those Fibonacci levels. These levels often act as key support/resistance levels used to anticipate potential price movements, market turning points, and points of profit-taking.
The tick is used by many traders for timing their entries. TICK levels above 400 or below -400 are often a very clear indication for a (short term) reversal. Traders looking at placing a long trade will want to open their trade when the TICK is below -400 and traders looking to place a short trade will want to open their trade when the tick is above +400.
Suitable for breakout, reversal, or trend following strategies, many traders are using volume profiles in their trading arsenal to get visibility of the price levels where the most and least volume has traded over a given time. When price returns to an area where previously a large volume has been traded we can naturally expect support/resistance. Likewise, when price returns to a region where previously a very small amount of volume was traded we can expect the price to move through that area with relative ease.
The Unfilled Gap Indicator shows all unfilled (and optionally filled) gaps. It allows you to never miss a gap that was created days or weeks ago. Unfilled gaps are presented as red lines on your chart from the point they were created to the present time. Filled gaps (if this option is enabled) are presented as brown lines on your chart, from the point they were created to the point they were filled.
The volume-weighted average price (VWAP) is one of the most famous indicators used by day traders. TDU VWAP not only shows you the swap but also allows you to select up to 4 standard deviation bands. The basic VWAP is drawn on the chart with up/down coloring. When VWAP is trending up it is colored green, when VWAP is trending down it Is colored red. And when VWAP is neutral then the color is white. Of course, you can change any of the colors to your liking
Many traders add 1 or more standard deviation bands to the VWAP indicator. When price moves beyond 1-2 standard deviations away from VWAP it is very likely that price will return to the mean (VWAP). This makes these standard deviation bands a good spot to be looking for trades. With TDU VWAP you can add up to 4 different standard deviation bands and customize them as you wish.
Whether you are a fundamental or technical trader news events are always important. During news events, we often see huge volatility in price. With the TDU News Indicator, you won't make the mistake of accidentally opening or being in a trade when an important news event is incoming. All news is shown in a clearly condensed table and also as vertical lines on your chart. You can choose to hide low and/or medium impact news and even filter out news events that are not important to your trading.
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.
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In the next chart example below, the 50% swing retrace line and price action signal both came together at one common point and showed us a nice setup here, but what you should really take away from this example is that it was in line with the general thrust of the market, notice that prior to the pull back, we saw a nice rally up, and the pull back did not exceed the 50% area , rather it rejected it strongly and has now bounced aggressively higher to the new recent highs.
I hope this article clears some confusion about Fibonacci levels. Personally, I only get a handful of these setups every month on the daily charts, but when you see these swing retracements inside a general trend movement, its wise to mark them on your charts and then look for a price action confirmation entry signal. These setups typically lead to some very significant, and potentially very profitable moves, for more information on trading price action signals from 50% retracements levels, checkout my price action course and members area.
I just found thos out last week on the chart and I saw it gob ng more profits and I started searching more about it and I saw your article. You just confirmed it to me that this strategy works out perfectly. Thank you
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