Fibonacci Retracement FOREX Strategy

so you've probably spent a couple of hundred hours on youtube trying to find out where to actually place a fibonacci retracement tool how to adjust the fibonacci retracement tool settings to no avail and you think that this is just complete wizardry and witchcraft well let me tell you right now you've come to the right place i'm here to shed some light on the fibonacci retracement tool and how you can use it effectively in your day trading strategies [Music] welcome back to the channel everybody my name is artie and this is the moving average a show where we teach you all of the strategies in forex trading in crypto trading any kind of trading so that you guys can become better day traders and more profitable so let's jump right into it the fibonacci retracement tool is absolutely lethal when used correctly now if you don't know the theory behind fibonacci just type in fibonacci into google and you'll learn the entire history of it but essentially it is how things measure in correspondence to other things according to nature for example the length of your fingertip to your nose is a fibonacci retracement of the height of your body you don't believe me go find a measuring tape but why does it work on forex and currency pairs let's jump right into the charts and i'm going to show you exactly how to set it up and how to use it okay so i've got up euro usd here the most commonly traded currency pair in forex and if a new person comes into this and looks at this chart they think cool the price just moves erratically in every which way and there's no rhyme or reason to it and that is incorrect if you've watched my previous video with moving averages you know that there's a certain trend that the price is following now to find that trend i suggest using a 200 moving average on any time frame that you're looking at this will give you a general idea of which direction the price is actually moving currently we are looking at a 15 minute chart and as you can see here the price is consolidating rising above and below this 200 moving average so there's no clear indication of where the price is headed whereas if we take it back a few scrolls you can actually see the price dancing below the 200 moving average showing a clear and concise downtrend so essentially there are key levels on a fibonacci tool that tell you where the price may actually go the opposite direction those levels are the 0.382 the 0.5 and the 0.618 those also work in percentages so it would be 38.2 50 and 61.8 percent but how do you know which level it's actually going to reverse that i've got a few examples up here on the screen and i want to show you exactly how and why this works so as you can see here the price of the euro us dollar has actually started to skyrocket at this point getting really massive parabolic spikes up this shows a massive amount of momentum and when that actually happens it's harder for it to go down a lot so when things like this happen you're usually expecting a 382 retracement because there's so much momentum on the upside it's not going to come down too much so let me help you set up your fibonacci tools so that you can use it the correct way on the left hand side of your trading view platform you're going to go down to the third icon that says gan and fibonacci tools click the drop down arrow and go to fib retracement and put a star next to it so it goes into your favorites toolbars okay so let me show you where to actually place your fibonacci tool as you can see previously we were in a strong downtrend making lower lows and lower highs consistently then at this point the price came up and did not make a new lower low this right here is the start of the new momentum that's where you're going to place your fibonacci tool now i've zoomed this in a little bit closer so you can see exactly exactly where to place it right here as the price came up came down created a long wick this is the igniting candle this is the one that started the move so you're going to start your fibonacci tool right here at the base of the body of the candle going in that direction so you select right here at the bottom of the body and you drag it up to the top of the move where the momentum actually started to slow down and also to the top of the body's not the wicks so you've got your fibonacci tool from top to bottom now spread it out so that it covers the price action and then just drop your tool and as you can see here we had this massive momentum up it started to die down and then tested the 382 level retracement perfectly then continued its strong uptrend so basically as you're live trading and you see this the price comes down here and then you get a huge bullish candle off of this it comes back to retest it that's when you know this is going to be your entry point because you've seen this massive bullish momentum to the left so you've got your entry point right here now where is going to be your take profit i like to split up take profit levels into three the first is gonna be a sure fire it's definitely gonna go there the second is if it has a nice amount of momentum and the third is if it's on a bull run and you just got lucky don't count on the third as much but the first and second are a very high probability so i've zoomed this out the take profit one level is the previous highest high that it formed so from the 382 to the previous highest high is going to be your first take profit level your second take profit level is going to be the negative .25 also a fibonacci level and your take profit three is going to be the negative six one eight you see how the levels are going the opposite direction the 0.25 is half of the 0.5 retracement so as you can see here with these three take profit levels this is your entry this is your take profit one take profit two and take profit three once your first take profit level hits you can go ahead and move your stop loss to break even then once your take profit two hits you can move your stop loss to take profit one then a trailing stop loss all the way up to take profit three so that you have a zero risk trade and as you can see this worked out perfectly and let's see how much we would have made off of this trade from the 382 level all the way up to take profit three which happened right here so 19 hours 75 pips perfect trade now i'm going to show you one more example and then we're going to get into the settings of my fibonacci tool so that you guys can know exactly how to set it up so this is the second example this as you can see here we are at a slower downtrend so it's not as dramatic as the previous one where it just spiked up like crazy it's got nice steady movement to the downside when the movement is nice and steady you're looking at a 0.5 or 0.618 level retracement so same as before from the start of the big move to the bottom where it started to go the opposite direction so just like before you get the igniting candle that started the move all the way until the move started to lose its momentum so you take your fibonacci tool from the top of the body to the bottom of the move and sure enough we got a perfect 50 level retracement again you know that the trend is going this way because the 200 moving average is actually slanted down price action is moving below the 200 moving average came back up hit the 50 level and continued to the downside and again this trade hit all three take profit levels this one however is more profitable because it went to the 50 level not the 382 so you get some more pips out of it let's find out exactly how much we would have gotten take profit one take profit two and take profit three happened right about here 257 pips in five days now i'm showing you this on a 15 minute chart so these trades are going to be much more long term this same strategy can be used on smaller time frames as well like the five minute chart so we've got it down to the five minute chart we can see our 200 moving average is slanted down meaning we're in a downtrend we see this huge bullish move so let's take our fibonacci tool take it from body to body and we get a perfect 50 level retracement and a continuation on the downside now this is a much smaller time frame these are five minute candles so let's see how long it would have taken for this trade to play out from the 50 level down to take profit three that was only 16 bars so one hour and 20 minutes and you would have gotten 30 pips on that on every single time frame no matter if it's the one minute the five minute the four hour the one week all of these fibonacci retracements happen consistently so whatever time frame you like to trade you can use this tool now let me show you how to set it up so once you select your fibonacci tool and you draw it out on the screen it's going to look completely different than mine but once you drop it on the chart this little window right here will pop up and you'll be able to adjust the settings so click the settings button once you click that settings button you'll be shown this table right here i need you to adjust your numbers and your colors to match mine exactly i have nine levels set out right here at different colors and i'm going to explain why i've chosen these colors so the one line is the start of your move i have that as blue so it's a clear indication of where you started your move and the fibonacci retracement lines the 382 the 0.5 and the 618. the 382 is a white because it's soft like it it's hard to hit a 382 retracement unless you're looking at crypto because there's so many parabolic spikes there but the most comfortable retracements are the 0.5 and the 618 which are considered the gold zones so i have them here in yellow then i have a few more levels that i'm going to explain in just a second but it's the 764 and the 0.88 and then the green ones are going to be your take profit levels your 0 your negative 618 and your negative 0.25 so copy these settings take a screenshot make sure you have that adjusted and make sure you also adjust these bottom values as well if they are not the same as i have here i like to have the prices indicated on here as well as the levels in value the reason i like to do that is because you can actually set up your trades ahead of time so say you get in at the 50 level and you want to set your take profit and you don't want to look at where the price is it tells you right here 1.18991 so i want to talk about these two red levels and explain why they are there sometimes when you draw your fibonacci tool and the price is actually live and you think that it's going to stop at the 0.5 and then it doesn't that's why i have these levels in place because your analysis may be correct or you may be wrong and it might actually be retracing on a higher time frame so when you're looking at lower levels like this like the five minute or the one minute you have to be wary of this that's why i have these two red lines so imagine the price comes down here and then starts going up but it does not stop at the 50 level or the 618 it continues up to these higher levels that means your analysis was wrong on that time frame and it's actually going to retrace up on a higher time frame let's say the 15 minute or the one hour time frame so you're going to get a longer retracement so if you place your trade here at the 0.5 level retracement you're going to drag your take profit level down to take profit 3 and your stop loss is going to go to 0.88 this level means that your analysis on this time frame was wrong and it's going to retrace further to a higher time frame so this is going to be your stop loss that's when you know that your analysis was wrong whereas if you do it on a 382 level you can actually drag that down to the 764 it'll be the same distance it'll just be a different level and then of course adjust your take profit level so that it matches take profit three so what are the rules put up your 200 moving average to determine the trend which way the price is actually going find a nice solid movement in that direction as you can see here big red candles going in that direction and then the price stops and comes up this is going to be your indication to use your fibonacci retracement tool adjust your settings lay your fibonacci tool from the top of the body to the bottom of the bodies of that move and watch the price retrace at that level set your trade set your take profit levels and get some money in your pockets okay so as you've seen you can actually be wrong in your analysis and you could lose the trade but you also have your stop loss levels to mitigate that risk but i have a way of actually giving you an indication of when this is a good trade to take now it's going to be a little bit late but it's going to be far safer i like to stack different indicators on top of each other and you know some of them are paid some of them are free but one of the ones that i found that i really really enjoy using is the pip hunter baseline overlay now this one shows you it's basically a moving average kind of continuation and gives you signals of when that continuation is going to go in the direction that you've chosen so as you can see i have the 200 moving average on here and then i'm going to add the pip hunter baseline overlay so with the baseline overlay you get this beautiful cloud to show you a clear and concise direction of where it's going to go as you can see we had this retracement here which i just showed you how to take but with the pip hunter indicator it actually gives you a white star showing you a continuation of that downtrend so once this white star prints that's going to be your entry point and the same goes for the reverse when the trend starts going the opposite direction it prints a blue candle showing bullish momentum so this works two ways you see the price moving down strong momentum and then you get a blue star indicating the price is going to go up so this is when you start watching for which fibonacci level it's going to hit you wait until you get the white star you enter your trade right here once this candle closes and boom you have your short position on this candle your stop loss is actually just going to be a little bit behind the top of this move not too close because you might get stopped out but comfortable enough a way to where you won't lose too much money if it goes the opposite direction and as you can see here it still went to take profit level three i absolutely love this indicator and if you guys want to know more about it there's a link to their discord group which is free huge amount of people nice amount of chat you can ask questions over there just head on over there everything's linked down below so if you guys got some value out of this video make sure you hit that like button down there just clickity clack that like button don't forget to subscribe if you haven't already and we will see you in the next video

Channel: The Moving Average

Views: 43,842

Rating: 4.9601331 out of 5

Keywords: Fibonacci Retracement FOREX Strategy, Fibonacci Trading Strategy, Fibonacci Trading, Fibonacci, Fibonacci Retracement, fibonacci trading strategies, fibonacci trading system, trading, trading strategy, trading strategies, fibonacci strategy, fibonacci strategies, forex, day trading strategy, day trade, fibonacci trading, fibonacci retracement

Id: r9SpkG1P0h0

Length: 15min 37sec (937 seconds)

Published: Fri Mar 12 2021