Fibonacci Trading Strategies

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Fibonacci Trading Strategies

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Technical Analysis: Expert-Level Day Trading Tactics 2024

Technical Analysis for Pros: Empower Your Day Trading Strategy With Chart Pattern Trading and Candlestick Trading Hacks

05:22:15 of on-demand video • Updated November 2023

Master Advanced Technical Analysis Strategies & Profitable Hacks for Traders & Investors With Real World Examples Included!
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How To Upgrade Your Trading Skills in No Time With These Proven Technical Analysis Techniques
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Hello and welcome back to advanced technical analysis strategies for traders and investors by wealthy education in this video we're going to talk about Fibonacci trading strategies. Now there is the fib. Retracing the Fibonacci extension. Now I will start this out by saying the Fibonacci retracement seems to be much more widely followed. So a fibonacci sequence it's a mathematical sequence and it goes way beyond the scape scope of this video to explain the mathematics behind it. But essentially you have various repeating levels in nature that make up the shapes of rivers the growth patterns and crops the way generations of beetles are bred. I mean you name it Fibonacci sequence tends to pop up everywhere. So this has caught on in trading. Now I don't know that there is any specific science behind it other than so many people pay attention to it it becomes self-fulfilling in really it doesn't matter. The fact is a lot of people pay attention to it and therefore it becomes important there are a plethora of levels. Essentially the math works out one plus one equals two. Then you add these two together one plus two equals three two plus three equals five. And those are like the Fibonacci numbers but there are specific ratios we're looking for and I'll go ahead and show you what a fib ratio looks like on a chart. You go on this pitchfork menu you get to February treatment you just find a swing high so we swung high here and we broke down. So how are we going to use this. Well we're going to use this to show predictive power over where the market may find resumption of the trend. So we've made this wing low and right here on the sixty one point eight percent Fibonacci retracement level. One of the most common ones the sixty one point eight fifty percent which technically isn't a Fibonacci ratio but it's half the move and thirty eight point two are all areas where you may see traders come back in and join the impulsive move lower. So you're essentially looking at it as a way to enter a move that's already started. So using this Fibonacci you just said drag it from the swing high to swing low or the other way around. If we're in an uptrend you then begin to look for a reason to in this case short the market so you can use price action such as IS SHOOTING STAR candle here or you can just enter. Some people will just enter blindly at these levels knowing that eventually one of these three should stick. And then they just write it out. And the idea is you're supposed to return back to the lows some will short up here for example and then take their position out of the market at the next Fib level because there is a little bit of predictive quality there as well. So let's go ahead and take that off. Let's change charts and you'll notice I'm just randomly pulling up stocks and you can find these things everywhere. So I suspect this is probably some type of Fib retracement. Yeah. So that's sixty one point eight again you can see we got a very bearish candle and we started to work our way down since then we go ahead and zoom out and here in this even bigger move you can see that the thirty eight point two percent Fibonacci retracement level for a massive shooting star and a move a lower in forward. There are other indicators that you can use with it some people will look for some type of confirmation of a downtrend so they will put on something maybe along the lines of a 50 day EMH just to show that there's plenty of resistance or they may find any you know an even longer term one on the daily chart. This is the 100 day EMC which is widely followed as well. So now when I draw this fib something that will catch your attention is that we are right at the 100 day EMC. It is sloping lower. We formed a shooting star right at a fib level. So that's definitely something to pay attention to. You can see how all that combines the fibs of course work in the opposite direction. So if we're in an uptrend and we get a bit of a pullback. If you're looking for a way to get involved you can use the Fibonacci retracement tool there as well. Let's go ahead and go with this dog whatever this is. So even on these less liquid stocks that you may or may not know a lot about. You can see that the technical analysis works out we pull back exactly half 50 percent of the Fibonacci retracement level after a huge spike selloffs. Not a surprise after the big huge shooting star. But look the buyers came right back in. So in this case the trend is up. You are looking at a move higher eventually you're waiting to see whether or not you get some type of confirmation. Maybe you put on again the 100 day moving average. It's just below right there. Form a hammer. And that was your entire signal just at the 50 day or 50 percent Fibonacci retracement level you'd see right there. Now much like support and resistance it's not necessarily to the number. It's it's an area you start looking for price action so with Fibonacci extension so this is using the same math assuming that you are going to have a continuation of the move. So you'll notice that you know this is 50 percent here but then what we start to look for is a move to the higher levels. And on this chart. So for example you go ahead and change this weekly. It'll be easier to see their. So for example if you take this entire move here you can see that we pulled back to sixty one point eight. Rally towards the one point six one level and now we're going even higher. You could probably even maybe argue that the entire move started here and then you could even use that. And that is one of the fundamental issues with Fibonacci it comes down to the time frame. So the best way to use Fibonacci quite frankly number one. Like I said retracement are followed much more than the extension and you just saw an example of why. While it is somewhat predictive and there are reactions and these levels extending past the initial move it seems like much more focus is paid on the retracement but so I'll go back to the retracement tool and then what you're looking for the best Fibonacci strategy without a doubt is one that mixes several levels at the same time. So this move here before this significant pullback went to thirty eight point two. You can draw another one from this move in the middle and you can see if anything lines up and it does the seventy eight point six again on a major level. But there's two different fib traders looking at those. You can draw a fib here which is a thirty eight point two percent Fibonacci retracement level which is the entirety of this move. That's a zero. You can extend here and you can see that they overlap here as well and you can see there was reaction. So that's the idea what you're looking for is a multitude of reasons I think the traders are going to be paying attention to that level using the moving average right along with it does work fairly well. The the thing about Fibonacci though it's so widely followed I don't know if the math actually makes any sense but I do know that so many people pay attention to it it just works. So by matching up as many Fib retracement on top of each other as you can from longer and shorter term perspectives you have a better opportunity to be on the right side of the trade with several different short term intermediate and long term traders. And again the extensions do work but they tend to. I would say probably be a little less reliable on the longer term trend shorter term trading. It does tend to do a little bit better and that might just be a function of needing to cover less space to get to that one point six 1 8 fib ext level.