Day Trading Rules - Secret to Using Fibonacci Levels

hey welcome to this video series this is dr. Barry burns with tough dog trading and today we're going to talk about D trading rules specifically with regard to Fibonacci retracement levels what are they okay first thing is Fibonacci retracement levels are support resistance lines and we are basically plotting levels on the chart after an impulse move to find how far the market will retrace before continues in the direction of the trend so let me show you exactly what I mean here using the e minis so here's an impulse move and what we're looking for here first thing is a major move in the market a very significant move and we're looking for a significant high they will stand out to anybody on the chart and a significant low in other words highs and lows that will visually stand out to pretty much anybody looking at the chart that's the basic rule okay now after we get the impulse move the question is and the rule that we're going to apply is if we want to trade in the direction of this trend now we have a retracement and it retraces okay we can see in hindsight it went this far but if we're trading in real time we don't have that benefit we want to know well is the market going to retrace maybe just this far and then go down or maybe it'll go up this high and then come down how would we determine that the market will only retrace this much in other words this would then be a great entry point to then take a short in the direction of this original trend and that's the question we're answering with today's day trading rule and Fibonacci alright so first of all let's look at what these Fibonacci numbers are let's bring those up so that you can have them on your chart so here are the numbers that I use and we're gonna specifically look at these remember this is a percentage of how much the market retraces back toward the initial impulse move where it started so we've got zero percent if it doesn't retrace at all twenty three point six thirty eight point two fifty sixty one point eight seventy six point four and one hundred so those are the numbers that we're using you can write those down if you need to import them into your own charting platform and I'll show you what it looks like here in just a moment so and go up here to our Fibonacci retracement drawing tool we start here that's the beginning of our impulse move we bring it down to the bottom and now you can see these numbers draw on the chart so this is where we started from if the market goes down here and it doesn't retrace at all how much is it retracing zero percent if it goes all the way back to where we started it retraces a hundred percent of the move so then we have these ones in between twenty three point six thirty point two fifty halfway 61 point eight and seventy six point four so as you can see now we're just going to be using this tool from this point on now here's the tricky part that a lot of people don't talk about with Fibonacci retracements for day trading and by the way this works for swing trading works for emini stocks forex whatever so we come to our first Fibonacci retracement and these are support resistance levels is essentially what they are the reason that I'm doing this video is because they did another video on invisible support resistance levels where I talked about floor trader pivots and I talked about mid pivots and one of the people who watch the video put in a comment asking me if those were Fibonacci levels and I said no they're not those are different and I promised that I would do a video on Fibonacci so here it is but here's the big question here's the tricky part so we have a resistance level right here the 23.6% retracement of this impulse move right how would we determine whether that level is going to hold and the market will continue to go down from there or if it will break through see in this case it breaks through so that resistance level didn't work this time which one worked well the 38.2 worked right that's where it went - whoops it went to there and then it continued on down but it could have also gone to 50 or it could have gone to 60 1.8 or couldn't gone to 76.4 heck it could have gone all the way back to 100% or even above so the big question the tricky question here that very few people will answer for you is fine everybody or not everybody but a lot of people know how to draw these levels but they don't tell you the secret how to determine which one of these will be the final resistance level that will hold and then the market goes down back in the direction of the trend after that because and that's so important because that my friends that's gonna be your entry point to go short so let me show you how to do that so now I've added the cycle indicator to the bottom of the chart and this makes all the difference in the world so as I said Fibonacci levels as well as some other levels like pivots and so forth they give us price levels where we would look for potential highs and lows on the market the other thing though is that a chart is a two-dimensional object so yes we have price over here in the y axis but then on the x axis we have time and that's it that's what you got to work with on a chart time and price so we are looking for the confluence of time and price in order to find where and when the market is going to put in a high and then continue back in the direction of the trend so the Fibonacci levels they give us potential prices where the market could top out but what we also need then is time and that's where the cycle indicator comes in so you'll see here this is a topping of a cycle the key element here is where it turns from green to red right in there and then we match that with the price level so again time and price and that's what helps us determine that all right this is a good place to go ahead and re-enter the market and do a short and that's how we do it now the price is pretty easy the cycle indicator is a little more tricky it's not something I can go into now this video is already a little over time but I do offer a free webinar periodically where I give people this indicator and teach them how to use it it takes about an hour but the webinar is free since this is being recorded and people will be watching this for months and years to come I can't give you a one particular link where you can access it because we changed the schedule of the webinar and but here's what I'll do I will give you my email address and if you want to send me an email and if anytime in the future ask me when the next webinar is going to be where I give away the cycle indicator and teach you how to use it I'll be happy to do that so there you go there's my email address barry at toppdogg trading comm send me an email if you'd like to attend one of those free webinars about timing your entries and will let you know when the next one will be whatever month year decade you respond okay so if you liked this video and you're watching this on youtube please click the thumbs up icon below and leave a comment telling me what you'd like me to cover in future videos also I'm giving away one of my favorite read strategies it's called the rubberband trade and it has an extremely high win-loss ratio it's a very simple strategy you can learn it in about 26 short minutes get the video explaining that trade strategy absolutely free by clicking on the image in the top left corner or if you're on a mobile device please click on the little eye with a circle around it in the top right corner of this video or also it's the link is down in the description and once you do that I will personally email the video to you [Music] [Music] you

Channel: Jim Houston

Views: 1,329,299

Rating: 4.8441486 out of 5

Keywords: day trading rules, day trading strategies, learn day trading, day trading tips, day trading forex, day trading stocks

Id: ESmiwNvTFf8

Length: 8min 41sec (521 seconds)

Published: Sun Feb 14 2016