Lesson of the Day: Adding a secondary indicator for confirmation
One of the hardest things to understand when you first start looking at fib grids is trying to weed out the setups that are going to work from the setups that aren't. Essentially all we are doing here is buying pullbacks with a trend in a measured, reliable fashion correct? Well what i've found CAN help is using a simple confirmation indicator to identify areas on a chart to look for our grids to come into play. A foreword - You don't need to do this. You have all learned thus far without it, but I think it can help identify areas to look for trades in a simple fashion that should increase your profitability.
Try adding a 6,3,3 Slow Stochastic to your charts. Thats it. Simply start looking for grids to come into play when the indicator shows it getting severely oversold or overbought (around the 20 and 80 areas) on the charts. Play the grids exactly the same, look for the same adherence to the grids and enter the same way. The idea is simply to pick out those MAJOR pullbacks and leave the lower odds minor pullbacks alone.
The other nice thing is it is really easy to skim through your charts and see which pairs are in these areas very quickly so you can pick out the one or two that are and start looking for grids to play there.
Image 1: The naked chart... which pullbacks are major and which are minor? Its hard to tell.
Image 2: By adding the stochastic and simply waiting for severely overbought/oversold areas to be hit we can identify the two setups that represent the highest odds setups.
Image 3: More example trades.
I hope this can help you guys. Like I said, its just the icing on the cake - you don't need it, the cake will make you fat either way, but it can make the entire process of eating it that much better.
Cheers!
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