Counter trend trading the Fibonacci bounce

[Corby]

Hi all,

I would welcome any opinion on the idea of trading the bounces off of Fibonacci Extension levels. I know that the 'Trend is your friend' and this strategy would involve counter trend trading and is therefore risky. However, if you create tight stops and take profit wisely you can limit the risk.

Forex trading institutions are the forex market movers and use Fibonacci Extension levels to take profits to some degree. If you therefore plot your extensions accurately you will notice that there is often a bounce at these levels. The bounce may be considerable or very small so profit targets may vary.

The tricky part is knowing on which of the extension levels a bounce will occur; the 1st, 2nd, 3rd level, a combination or none at all.

So we need some clues that will help us determine the most likely level that a decent bounce will occur on. If we can narrow it down, we can then use appropriate stops and targets to be successful over time as the odds will be on our side.

Has anyone tried this method? All ideas welcome.