Fib Retracement Trading...

[daedalus]

Originally Posted by kagein

Yeah i did....a shame i messed up, it would have been a nice little trade.

Ok....how do you start your day?...do you delve right into your trading time frame or do you study the daily first. if you do, what would you do if the daily is in a downward trend but the hourly is in an upward trend.

There is an argument to be made for using a filter chart (longer time frame) and only trading in the bias of the filter chart on the smaller charts and it is a valid point.

However, in my experience, there are great trades to be had with the longer term trends and against it. Over 100 random trades i'm sure it probably would average out to be about the same outcome.

I simply trade in the context of whatever chart i'm looking at. If the trade isn't valid on a 30min chart, but is on a 4 hour chart, then in the context of that 4 hour chart, why not take it? I just haven't really found there to be an edge with trying to use a bigger daily or 4 hour trend to establish my entries.

Makes life too complicated!

If you did want to do this - and the scenario you outlined did happen (one is in uptrend, the other downtrend) you just need to sit on the sidelines. Thats the entire point of filtering trades with a longer term bias.

[kagein]

On the GBP/USD hourly chart would you have drawn your fib lines from (1.9726 - 1.9335) or (1.9795 - 1.9335)

[daedalus]

Originally Posted by kagein

On the GBP/USD hourly chart would you have drawn your fib lines from (1.9726 - 1.9335) or (1.9795 - 1.9335)

When in doubt, take the bigger grid, or, better yet, measure both grids and look for confluence between the grids.

Image 1: Big Grid - Price action obviously respecting that grid.

Image 2: Smaller Grid - Price action respecting it, but respecting a higher level.

Image 3: Note the confluence at the 61.8/75 levels with both grids? Thats where I would want to get short.

Cheers!

[tonymand]

Daedalus has referred to this before but I thought that this was such a good example it was worth repeating. Irrespective of higher timeframe grids the position you are in is always subject to 2 different fibs in operation. I went short after the 78.6 retrace of the downtrend. When in turn that peak falls 78.6 your fib comes into play again and becomes a high probability turning point which on this occasion was tradeable in its own right. Although my profit target is the 38 area there is an arguement that to make the approach logical the better target might be 23. This squeezes the most out of the trade while having you on maximum alert for the turn

[tonymand]

Just to complete this idea the same relationships are apparent if you focus down on the retracement at the end of the H1 fall. This is clear on the 15M shot. Important then to note where we are right now (shot 2)

[daedalus]

Great Posts Tony! Thats a very important point! There are always two grids competing with one another and we need to be cognizant of both if we want to be successful in the markets.

[kagein]

i took the GU trade yesterday and didnt know where to set my profit target cause of the two grids in play. what would you do then? just take the 38% to be safe?

[tonymand]

Originally Posted by kagein

i took the GU trade yesterday and didnt know where to set my profit target cause of the two grids in play. what would you do then? just take the 38% to be safe?

My initial target is always a significant nearby SR zone or the 38 level. I look to see what price action does at these gateways and dont always get it right as my early exit on EY yesterday showed. In testing though if you just exit at 38 you have a winning strat

[Sweet Pip]

That last graph makes it seem like 3 grids are in play...no wonder my win-loss ratio hasn't been very good lately...or is it because of all the stock market kaos playing with the trends? Otherwise It's been hard to determine which trend I'm in

But that does help a lot as I had just noticed it myself, and I thank you for your confirmation. Thanks Now I just have to practice some more.

[tonymand]

Entry this morning on EY. You dont need an indicator to tell you that the upward momentum is slowing. Once we are in the 78.6 zone we are looking for a turn. This is riskier than normal because the failure swing on the way down may indicate the H1 is turning up but in my experience there is no way of truly knowing and even when it does we often get a successful trade. Keep a close eye on this though and get your stop to break even as soon as you can reasonably do so. This is an evening doji star (reasonably rare). It is not quite classic as candles 1 and 3 are a little shorter than you would like