Fib Retracement Trading...

[daedalus]

Well boys, as I may have mentioned before, I started back at trading the S&P 500 e-mini futures this wednesday. EXACT same method. Same rules, exits, everything. I just wanted to illustrate that this method applies to ANY market and works exactly the same way. You can go out with what you've learned in here and trade Crude oil, wheat, corn, soybeans, s&p 500, 600, russell 2k, dow jones industrial, APPL, RIMM, GOOG, 30 year bonds, EVERYTHING and do it succesfully.

I just took 300.00/contract out of the S&P in about 5 minutes over lunch. Easy peasy japanesy.

Cheers folks!

[didjerdu]

You, Daedalus ARE THE MEN OF ALL MEN!
(I'm just usin' up posts here to become a girly man.....not quite a man yet!

[NKE]

Originally Posted by daedalus

I've had a number of requests about how to utilize fib retracements in the markets. So, rather than ***** out another thread with off topic chatter, I thought I'd just start a thread that we can discuss setups and different plays in.

If you want the gist of how to utilize and draw fibs, check out this video. It is not mine, I didn't make it, but I think it illustrates the basics of the method fairly well.

I focus 99% on 61.8% retracements in the markets WITH THE TREND, IN A TREND, on the 60 and 240 minute charts. I also play a shorter 233 tick (allmost like a 10 min chart) for pure daytrade entries.

So as not to violate link rules on this forum, if you are interested in the video i've been speaking of simply pull up Google Video and type in "Fibonacci forex" and search. The video should be the first result. I recommend viewing it on the google result type for better video clarity.

I've got some running around to do today, but i'll try and post up some chart examples later today.

Cheers!

Basic outline of this thread so far:
Lesson of the Day: Basic Setups
Lesson of the Day: Ticks Vs. Time Charts
Lesson of the Day: Some Example Trades
Lesson of the Day: Trade Examples
Lesson of the Day: Respecting Da Grids
Lesson of the Day: Advanced Tactics
Lesson of the Day: Trade Management Pt. 1
Lesson of the Day: Trade Management Pt. 2
Lesson of the Day: Trading Journals
Lesson of the Day: Scaling out of Trades = The BAD
Lesson of the Day: The Take Profit Revelation
Lesson of the Day: Adding Size
Lesson of the Day: Stop Loss Revision
Lesson of the Day: Secondary Indicator Confirmation
Lesson of the Day: Shallow Pullbacks, the other 50% of Forex Action

Hi Daedalus - flew too close to the sun!?
Thanks for taking the time to post your thinking about trading on fib retracements on the strong trend

I have read through your posts on page 1 and the subsequent posts

I was going to correct you on the taking profit on half the contracts point, but I see that you have worked this out - the probability on price reaching a short distance (say 20 pips) from a retracement is much higher than reaching say 50 pips. I haven't done any backtests, but logically, I would guess that you should take 75% of your profit at the 20 pip target and leave the rest to run

I was really interested in your short pullback set up. I had not seen this before and I will look at your proposal for TP at -10%. Price will usually test a previous high and either carry on or fail

thanks once again for sharing your systems and set ups

I see you use tradestation for charts, is this because brokers platforms are not good enough. I use Accucharts from FX Sol, which are pretty good

[daedalus]

Originally Posted by NKE

Hi Daedalus - flew too close to the sun!?
Thanks for taking the time to post your thinking about trading on fib retracements on the strong trend

I have read through your posts on page 1 and the subsequent posts

I was going to correct you on the taking profit on half the contracts point, but I see that you have worked this out - the probability on price reaching a short distance (say 20 pips) from a retracement is much higher than reaching say 50 pips. I haven't done any backtests, but logically, I would guess that you should take 75% of your profit at the 20 pip target and leave the rest to run

I was really interested in your short pullback set up. I had not seen this before and I will look at your proposal for TP at -10%. Price will usually test a previous high and either carry on or fail

thanks once again for sharing your systems and set ups

I see you use tradestation for charts, is this because brokers platforms are not good enough. I use Accucharts from FX Sol, which are pretty good

Hey NKE! Welcome! Let me know what you think of the short pullback setups. I'm still not using them very much. I focus mainly on deep pullbacks but i've heard from others that they are using the shallows with much success. That being said I have found they work much better on longer timeframes... 60min, 4hr, daily, than on a short time frame, so keep that in mind..

As for taking profits, thats for each individual trader to decide for themselves. I only tried to design this system to get out with the most amount of profit the most amount of times. It didn't make sense to me to try and hold for a huge gain every time because you only got that outcome maybe 1 out of every 6 trades, whereas by getting out for less pips, but more consistently 5 out of 6 times, you were actually more net profitable in the long run.

But i'm open to ideas on improving the system. A good discussion is always welcomed!

As for Tradestation, they are, as far as i'm concerned, the ultimate charting package. They are a bit pricey, but I feel they are worth it. I use them as my Future broker as well so if I get my charts for free assuming I make a set # of trades every month (Otherwise its 100.00/month). I use tick charts heavily and a lot of other providers don't offer them so thats one big reason why I stick with them.

Cheers!

[kagein]

This is a trade i just exited, Deep pull back method. Might think of refining the placement of my stops to maximize R:R.

All the lines on the chart are S&R lines taken from the daily and 4hour chart. I've found that if the 78.6% level more or less matches with a s&r line, its a potential great set up. I normally only look to play retracements of the 78.6% fib level for the big moving pairs.

[daedalus]

^^^ Gorgeous setup Kagein. And you are right with the S/R lines lining up with retracement levels. There are a lot of guys I trade with in the S&P and they look for swing high/lows levels to be broken and then retested with those retracement levels overlayed. It can be a very powerful combination!

[tonymand]

Excellent Kagein. What a wonderful TP point as well, double bottom, doji etc

[JimmyMac]

Yes, ditto the comments of daedalus. You sure combined that combination to maximum effect, well done.

A colleague executed a continuation short around similar vicinity (155.69 during yesterdays Tokyo shift), but differing reasons & probably lower down than your entry too.

Regardless of the price, the vicinity & reasonings for the trade are the important factor. If the technical crutches you use help identify the lower risk directional bias more times than not, then you're onto a winner.

Nice trade George. Appears as though you're paying good attention to the content on the Alternative Tech Templates thread

Amazing the difference a solid template (s&r) can make when you add another flavor (Fibs or whatever) to the pot huh?

Keep the workload up.

[kagein]

I'm getting quite confident with this type of setup and now that im getting a grasp of price action and how it behaves around s&r lines i think my trading can only get better.

The alternative template thread has a wealth of information, its rare that you get such insight on how pro's look at things. A good read for those who haven't come across it yet.

[Party1929]

Hi Daedalus,
Thank you for taking the time to write about your Fib Approach. I am guessing you are not so old but you certainly have a maturity in your trading approach.

It was very refreshing to read through this thread after using fib levels in many markets since the days of the Gorilla stocks of the late 90s dot com boom.

I am actually trading the yen right now as the Fed has decided to shred the dollar. Even tho we had a .382 retracement of the major upthrust, it is a .618 on the hourly chart and coincides roughly with historical support of .98 and the always strong 1.00 level so I am long.

I am expecting a move to the .618 of the hourly downleg at around 1.0281.

I think this trade met your requirements for double penetration of the .382 AND subsequent closes above .382, but would be interested in your thoughts

Have you ever looked at fib patterns? These can augment this system very powerfully...