Fibonacci Extension Tutorial

Hi,

In the attached PDF you'll find the Fibonacci method I use since years.
In my opinion this is one of the best methods to set Exit levels and to determine Support & Resistance levels, pip precise.

Dont worry if you never used Fibo lines, the tutorial and the method are very easy to understand. Nearly all popular Charting tools are offering Fibo lines and the setup is similar.
As an alternative you can download my MS Excel based Fibo Calculator.

The screenshots in the Tutorial are mostly from VT Trader and some from Tradestation.

So have fun with it, I'm sure you'll like it.
I'll try to answer questions asap.

cheers, Dave

Thank you for the tutorial!

Cutting loses short won't help if profits are small, ain't it? LOL

The Fibonacci Method on two current charts.

1) The Fibonacci Extension method and a MACD on todays 60 Minute chart.
2) The Method live in action on USDCHF.

So basically you just use MACD for entry when it gives signal on H1 and close at fibo? I wonder how do you determine overall trend continuation or reversal - also on MACD? I've been using fibos with great success but now I'm trying to use multi timeframe Stochs to determine trend - markets tend to chop recently.

The MACD on the chart should just give an idea how to set up a (little) trading system. Of course basing trading descisions only on MACD is a bit dangerous.
I'm not a big fan of all these common indicators, I base my trading desicions on true value calculation models and I use this fibo method to set Stop Loss and Take Profit levels.

How do you use the Fibos? I'm still amazed how accurate they are

Each pair has it's own favorite fibo. I've been trading only Cable for half a year and just needed to follow .618 and .500 for big moves and traded just like you moves after retracements. I've used also murrey math which basically is same as fibo but in a little different manner (shows oversold/bought). Unfortunately it stopped working and X-mas is over... So now I'm trying to only use fibos and basic AT like trendlines but need some help to determine the direction more precisely. Also swiching to USDJPY for more wavy moves, not jumps and consolidations.

I attached a word document which shows what happened with the USDCHF chart of yesterday. Perfect bounce of the 127.2% extension.
But we are still waiting that it reaches the 161.8%

I am quite fascinated with fibo but nv really know how to use them.Thx for the small tutorial. By the way, how do u set ur stop loss? Ur entry price is when macd histogram is above 0 or when macd crosses?

@ caventou

Regarding stops:
Most of the time I place my SL near the last low in a long trade or near the last high in a short trade.

Entries:
Well The MACD was just an example to show that you don’t need much for a trade, you may add further Indicators.

Here are some other “trigger” techniques:
LONG: MACD and Stoch. Slow are in buy (Line crossed only), Momentum is above 0 and RSI > 50.
SHORT: MACD and Stoch Slow. Are in sell, Momentum is below 0 and RSI < 50.

A breakout method:
Add Momentum, Bollinger Bands and Keltner Channels to a chart (if you don’t have the Keltner’s use other Deviation settings in the Bollingers).
If the Bollinger Bands are trading within the Keltners you watch for a breakout of the Bollingers and trade in the direction of momentum (trend or above/below 0).

As opposed to Bollinger Bands, which use standard deviation in the calculation, Keltner bands use Average True Range (they aren’t that wide as Bollingers).

Have fun playing with these setups

Looks like it hit the target already

YES! Just 5 pips above the target level
Went long at 1.2153 = booked 77 pips net.
Did you had a trade in the swissie?

no, I am just monitoring at the moment.

Thanks for the system. It looks simple, yet shows great profit potential. I guess observing the trend at bigger time-frame will provide better guideline on the trend on smaller time-frame.

Do anyone have any observation for other currency pairs?

do you think its reliable to use this technique on 30min time frame?

Good Day To You,i Try To Open Your Fibonacci Extention Tutorial And The Reply Was That It Damage.....i Will Appreciate If You Can Send It To Me.yours Chiefomo

Here is an active chart using the Alligator and Fabriconi Extensions on todays M1 USD/JPY chart for today (65th Birthday) on July 27, 2011 at
2:00 AM or 200 Hours on a 2400 Clock. Using the Alligator to detect an entry point (green, red, and blue indicate Uptrend) and (blue, red, green indicate Downtrend). So, when you enter your order; look at what color is on top. If green's on top, it's uptrend. If green's on bottom, it's downtrend.
Here is my latest chart.