I wish I could say I got the whole down move but I didnt, my problem with Fibonacci retracements is when to be sure it really is a retracement in progress and when is it just a little bounce off the resistance that is going to retest it any minute, anyway I got about half that down move then TP at the 161.8 fib which as you can see nailed it almost to the penny.
I made an attempt to countertrend off the 161.8 Fib I’ll probably regret that later but I thought it was worth a try, I wanted to pull off one of those webinar trades that always works perfectly in hindsight where they show a downmove you could have made a gazillion pips from, and then they say " and if you had wanted to you could have countertrended right here too !!"
Well I managed to pull 20 pips from that little countertrend I suprised myself with that one usualy when I try that it goes all wrong anyway I was looking at trendlines today and an interesting converging channel has formed.
First I’ve seen fibs placed like that. I dont see where you would enter short from a retrace, all i’m seeing is the fibs being placed alongside a swing. That extension would be wrong also. But maybe you have a unique way of using it.
The above Gartley example shows an uptrend XA with a price reversal at A. Using Fibonacci ratios, the retracement AB should be 61.8% of the price range A minus X, as shown by line XB. At B, the price reverses again. Ideally, retracement BC should be between 61.8% and 78.6% of the AB price range, not the length of the lines, and is shown along the line AC. At C, the price again reverses with retracement CD between 127% and 161.8% of the range BC and is shown along the line BD. Price D is the point to buy/sell (bullish/bearish Gartley pattern) as the price is about to increase/decrease.
That was a while ago I never really got into using fibs so I probably was using it wrongly lol I believe I was trying to use it as an exit point indicator by pulling up from the previous low to the next high, adjusting it to keep pace with the price rise then when the price started to resume the major downtrend I would short it with the 161.8 as exit point level. I later added that to my list of abandoned strategies lol
EDIT: hmmmm I just tried that again on a few random places maybe I shouldnt have given up on that idea so soon it seems to work quite well
I was using the 200 MA as a trend indicator and trading with it, now I look back at that I remember why I took the short, I entered when the price touched off the 200 MA then I pulled the fib to give me a 161.8 exit point because I believed the price would fall at least that much away from the 200 MA.
I didnt really try to take that idea any further I cant really remember why I dont believe it was because of any big losses, it was probably because around that time I got more into mql4 and EA coding.
I think I might try it some more next week with some 10 cent trades just to see how it does, or doesnt as might be the case lol
I’m not sure where I would set the stop loss at though maybe I could pull another fib the opposite way and set a SL at the opposite 161.8 then long it works more than 50% of the time it would be profitable …i guess
If your using Fibs as a retracement tool always go in the direction of the trend, so in an uptrend you go from swing low to high, downtrend from swing high to low.
Your looking to measure the percentage retrace of the original move, and to give guidance as to a potential entry level in the direction of the trend. They can also act as a trend strength indicator, if the retrace is small then the trend probably has some strength left in it, retraces over 61.8% we start to question.
Fibs on higher time frames used in conjunction with other important factors like S/R levels can be a very effective way to enter the market.
but surely you want the extensions to go in the direction of the expected move ? So when I pull the fib during a downtrend I want the retracement levels to extend downwards so I pull the fib upwards from the low to the high right ?
You shouldn’t. Its amazing how accurate the Fibs are with their “magic” #s. The funny thing is, you can draw a Fib wrong and still see how price reacts at these #s. Using Fibs on different swings, TFs and looking for confluence is a strong indication that it will reach the extensions. I use Fibs along with PA (200 MAs on any TF is almost a magical thing too LOL), just aiming for 100% until I fine tune the method further. But sometimes, you can tell when its gonna shoot past it.
really ? so you are using pretty much the same method i was using at that time ? Do you have a method for setting your stop loss based on the fib levels or do you use a SL based on a 2% risk or something like that ?
2% risk. I’m just looking for bounces off the 61.8 towards 100. I focus entires and exits on the 1min, using roughly a 12 pip SL. Sometimes tighter if the 38.2 pullback line is less than 12. But I will take setups on the higher TFs and zero in on the 1min, trying to lessen the risk as much as possible so higher SL are possible but I still keep strict MM. I’m a conservative scalper
I actually read a post of yours yesterday that got me preparing to make a trade journal thread soon. I was thinking to myself the other day how 1min really isn’t noise. It’s what makes up everything. You just have to learn how to read it. And then I read your post that said the very same exact thing. Kinda had a eureka moment LOL. After testing everything under the sun, the 1min, Fibs, 200MAs, BB for volatility, S&R and PA is all I need.
ive tested pretty much everything under the sun too lol it looks like we came to many of the same conclusions, but what i said about the 1 minute chart I do still believe it does still make up everything and that its not noise at all and is as tradable as any other time frame but, the one thing going against it is the spread, during my testing i realised something i had not considered before, the spread makes up a much higher percentage of each price bars movement on the 1 minute chart, this makes it harder to make a consistant profit, expecially during low volatility periods, but its not impossible by any means and I use the 1 minute chart as the primary testing bed for my EA’s because i beleive if a strategy works even slightly profitably on the 1 minute chart it will be killer on the higher time frame charts, where the spread has less of an impact.
Its only when ppl test everything under the sun do they realize that they are over complicating things. This is very true about the spread. Which is why I like to focus on the NY-London overlap. And there are still some pretty good moves towards the NY close. It’s dead man’s land for quite a while after that lol.
Sorry we are getting confused between extensions and retracements, they’re not the same thing. Extensions are levels beyond the 100% mark, as you rightly say in the direction of the trend. Retracements are as you would expect in the opposite direction to the trend.
Retracements can be used for entries, extensions can be used for exits.
No confusion. SDC is correct in what he was saying. I use MT. You have to start the Fib at the moving low point (creating the 100%) in the downtrend to plot the retracement levels in the correct spot. Probably would of been easier if he had just said “I want the LEVELS to extend downwards”.
In MT4 the fib retracement tool creates levels beyond the 100% mark thats why I called them extensions, but as EnPoint said I probably should have referred to them as levels so not to cause confusion between using the fib retracement and the extension tool, while we’re on the subject of fib tools have any of you guys used the fib arc tool much ?
