Fibonacci Trade Strategies – Define a trend
The key to successful Fibonacci trading is to do a trend in the direction of a trend. This is the first thing
Next, you attract the level of retracement. You want to enter into trade with better value. You do not want to blindly buy at a random place and guess the direction of a trend. You define the trend, wait for improvement and take a position in the same direction as the trend runs.
If the trend is up, then you walk for a long time (buy).
If the trend is down, then you short (sell).
When there is no trend of place, you do not take any position.
It simple, but defining the correct direction of the trend is not so easy. Unfortunately, it is necessary to open a position in the right direction to make money. If the trend is increasing and you have diminished, you will most likely end up with a loss.
Look at the trading chart from a distance
This is famous advice and it works and it works. Skip prices only on the trading chart and zoom out. What is the direction of the trend? You should be able to spot it easily. If not, then there can not be a strong tend at this time.
If you are confused, some say that you should see a trading chart with a child’s eyes. It is not as silly as it might seem. Children do not exceed things. If something is black then it is black. If the price increases, then it increases. Children do not look for hidden messages, which others do not know about. Next time, just look at the bus chart and try to define the trend at first sight.
Identify highs and lows
When the trend up, the price makes the higher and the higher lows.
When the trend is low, the price creates lower low levels.
If you are not able to identify these points, then there is a chance that the price is not increasing in one direction.
This is a simple technique and you just need to practice it. You can start by using only one line chart because it is easy to read, but in the end, you should use a candlestick trading chart with Japanese candlesticks.
Use the technical analysis tools
You can use technical analysis tools to assist in identifying current trends. It can be something as simple as 200 simple moving averages. When the price is above the line, then you only look for long positions. When the price is low, you only lose less.
This is a very simple and yet, an effective tool. Of course, you may want to use a small moving average like 100 SMA. Some merchants use a small MA, such as a period of 50 or 30. It’s up to you.
On the chart below, the price is above 200 SMA, so you only pull the retirement level to look for long opportunities.
The importance of the higher time frame
Now you have the tools to enter the situation and you know how to manage your position to get out at a good time. If there is a tendency in the place and you have correctly identified the direction of a trend, then you are halfway for a successful trade.
Next, you have to choose the right swing to pull Fibonacci levels, enter the position on the correction and exit on the extension. It sounds simple and it’s just that – if you’re investing in the right direction.
This can be a big problem because sometimes the trend is not so clear to look at. The tend maybe, but the price action may seem very mixed to you. Anyway, in what direction is he? And which one should you choose swing?
As a smart person, you probably know the answer based on the title of this section. High timelines are important to help.
You have to learn how to use it every time you are in doubt. Testing a high time limit is a good idea because it gives you answers to your questions.
Remember: if you are not sure about the direction of the trend, then check the high time frame.
Another important thing that I would like to remember and use. This increases the chances of your success to a great extent.
Always do trade in the direction of a trend towards high time limits.
To ensure this, we check the high time fame.
Wait a minute! Going small was a bad idea because the main trend is up. That was only an improvement. Note that the retracement level was completely fit. It seemed that 38.2% of the retracement level was the price hike. As I mentioned earlier, you have to be very careful because the Fibonacci retracement levels work in both ways and it is your job to identify the right trend. In the example, it seems that you should draw the retirement level for a small situation, but the high time limit did not respond to you.
To ensure this, we check on the 4-hour chart, in this case, with a high time frame. When you look at the left, there is a clear uptrend.
Correction ended and new highs, which stopped at 138% expansion with that step.
The reasoning behind this is obvious. A trend from the high time fame is going to last longer, so it is stronger. When there is a correction, on the lower time fame it seems that there is a change in trend direction. However, this is not the truth. The improvement ends on the high time limit and the price moves in the previous direction.
Remember about that simple rule and always invest in the direction of high time fame. In this way, the ratio of your win/loss will be very high.