I used fibonacci to make entry, place stop loss and take profit. In one tutorial at Babypips, I found that one way to use fibo is by placing the stop loss a little far from the next level from your entry.
How to Use Fibonacci to Place Your Stop so You Lose Less Money
The question is, just how far? 25 pips? 100 pips? I’m using H1 timeframe.
Fibbonacci are just a tool. You will run into trouble if you will try to use it as a strategy. The real question is:
-What is your strategy?
-What is your risk to reward? (the SL should be always narrower than the TP)
Also keep in mind that you cannot just place an order and hope that price won’t touch the next level of the fibs where your SL is. You need a confirmation that price will go in the good way.
I’d advice you to go into a finer study of Fibonacci use, especially how reasonable its use in technical trading (I see no sense in using Fibo to determine S/R levels like some traders do). Better to develop some brand new approach than putting you into a sophisticated tangle of some current “mad” indicators.
That really all depends on you, your strategy and how you interpret/use the Fibo levels. There is not one correct answer and a static approach (such as 25 pips away) is not advisable anyway. Financial markets are dynamic so you should have a dynamic approach.
I personally set my stop above the swing high or low, which would place it safely above the farthest Fib and give me enough leeway to exit early in case my trade idea is invalidated. This one works out for me since I usually look at swing trade setups and don’t mind setting wide stops for at least 1:1 return on risk on trend trades. As some of the folks here mentioned, it really depends on your type of strategy.
the answer is 42.