Fibonacci Trading with Bobokus

I would like to open a thread to discuss trading based on fibonacci, I know there are alot of traders out there including myself who trade with nothing but Fibs and I would like to share, along with gain some knowledge with other Fib traders. I have tried numerous methods but about a year or so ago I started looking more and more at fibs and began to see the repetitive nature and how price reacted to them. I have become pretty successful with Fibs now and think I can give something back, because I remember how hard it was to get started trading Forex with no experience.
Originally Fibs were very confusing so I simplified them to some degree and have had developed my own strategy with them. More or less a Fib breakout type strategy.
If there are any of you interested here is a sample of what my strategy looks like within the chart and we can discuss more if there are any traders interested. For the most part I only trade GBP/USD, but I have been known to take on a few others.
Ill post the actual strategy in the next coming post as well as open the thread to any questions.

Here is a quick explanation of the fib tool and what its levels represent, from this you should be able to understand the concept of applying the tool , too many question near the end of the thread that have been answered many times and I simply cannot keep repeating the basics over and over again because many are not willing to read the thread first. Ive added this in PDF format in the attachments. Please read this and attempt to read some of the thread before asking questions about basics.

Ive also added a template with the fib tools renamed already you simply have to set the chart up yourself. This is the updated version and where we attempted to restart things around (page 209) to simplify the usage and understanding of the different tools and their purpose.Just open a Cable chart to a weekly chart and apply the template.

* Ive added a PDF file in the use of Linear regression channels.If your interested its on page 277,post #4155.







*Current Video (New video 10/14/10)




Setting up the fib tool
GBP/Yen, S&R price following exercise
SampleTrade2 07/21/08
SampleTrade2 Part2 07/21/08

I am at a turning point in my career and after alot of hard work I am exploring that opportunity with my own website.
http://bobokus.com/
Out of respect of the admin here at Forex Factory and the rules of the forums I must depart. I contacted the Admin here at Forex Factory and wanted them to know ahead of time of my plans and did not want to cause a rift here on Forex Factory rather leave on a positive note as I have seen too often those that would use Forex Factory to prey on new traders and did not want to be in that same category.
I fully understand their reasoning and the rules. And on that note I would like to leave one last bit of information and encouragement. I wish everyone here the best in their trading and thank FF for a wonderful place for new traders.

The Web of The World Wide Web

The age of easy access to information now seems to have a negative flip side. The same easy access that can sometimes seem like a godsend, also allows a pile-on of bad information or content of little value which can lead you astray. Many older traders did not have to go through this as they were mentored by another successful trader or forced to learn through long tiresome study of charts and the live market. The common path for an aspiring trader these days is to pop open their web browser and begin searching for information to apply immediately in their live account. The problem is that their search often leads them to destinations which are infected by viruses of bad ideas, negativity, indicator obsession, and other road blocks to lead the knowledge seeker off their path. Even many of the books sold these days are filled with recycled concepts or hacked together strategies which the authors do not even use. The problem with this new found easy access to information, at least when it comes to the trading profession, is that trading remains a discretionary field, their is no clear path to success.The problem with this new found easy access to information, at least when it comes to the trading profession, is that trading remains a discretionary field, their is no clear path to success. There is no series of text books and exams that will graduate you as a trader. The same easy access to information that may be a godsend for other fields of study, can be a curse in our profession and might even make it harder to achieve success than it was 20 years ago. Add to this the continual barrage of sites with guru's who fuel the idea that trading is easy, then financially feed off those same people they have sold this idea to. At the end of the day what many of them offer is a gross misrepresentation of what it takes to trade for a living. Trading is far from easy. You know you have become a good trader when your are trading with profitably with ease, but that does not mean it is easy. At a certain point you will be at a stage where you are calm and at ease when entering and exiting trades, but the reality is it is still hard work and must be treated as a career.

The effect of much of the bad information you come across is that it leads many traders start off overly optimistic. Now don't get me wrong, having a positive attitude and being optimistic is a great thing, but not when the foundation for your optimism was built to crumble. Would-be new traders start by jumping right in to the live market after getting a hold of some set of indicators or "secret" set of moving averages and they are quickly punished for their naivety. Being led astray is not the fault of a new trader, In fact many now successful traders went through this learning process. It only becomes your fault if you continue to allow yourself to be led astray. A break from this cycle, and your first step back on the road to success, comes when you realize that the majority of those piling on this information will not help you nearly as much as you can help yourself. You help yourself by beginning to think for yourself and accepting the reality that you cannot just decide to "Be" a trader, rather you have to decide to "BECOME" a trader.


BECOME A Trader
The faster a new trader can make the mental shift to "I am going to become a trader" the faster they will get to the goal line where you can say "I am a trader."






To be a trader is easy, all you need is an account with money in it then you enter the market and start trading. To become a trader is more work. Becoming a trader involves you going through an evolution from the starting point of little knowledge to the point of having a tradeable framework, knowledge of the behavior of the market you trade, and a cool head while taking wins and losses. To Become a trader you must:

Begin With Humility

Emphasize Equity Management

Create Your Market Lens

Operate Like a Surgeoun

Maintain Your Mind

Expect The Unexpected

BEGIN WITH HUMILITY
This is very important when you are starting your trading career. You must come to terms with the fact that you are a small fish in a big ocean. The big fish will happily enjoy you as a little snack. When you enter the Forex market most of the liquidity is coming from big banks and experienced traders. Don't for a second start off by thinking that it will be easy to take these big traders money out of the market. What you have to learn is to swim along side the big fish, catch the same currents they do, don't swim against them or they will eat you up in passing.

A funny misconception is that these big traders must have access to some holy grail strategy or use some secret indicator, but this is plain and simply not true. Online you can find access to daily bank analyst reports on currencies. Analysts at the biggest banks in the world generate these reports which are then sent off to their trade desks for the bank's traders to consider. In these reports you will find simple, but proven technical analysis techniques - most commonly horizontal support/resistance, identification of trading ranges, Fibonacci, and fundamental themes. Begin by accepting that the other participants are highly experienced in the market and then learn to trade like them. They make money because of experience, not because they hold a holy grail or secret indicators.

EMPHASIZE EQUITY MANAGEMENT
It is crucial that as a beginning trader your emphasis is not on how much you can make, but rather how you can properly manage what you have. This is most likely to be the downfall of traders. It would be common place to see a starting trader risk their entire account on one or two positions. This is not the way to a sustainable trading career and this is not how the professional traders you are up against in the market manage their risk. At some point in your trading career you will likely have a string of bad trades. A reasonable number might be 10 losing trades in a row. Are you managing your equity in a way that you can survive this?

The solution is using simple formulas to calculate your maximum risk per trade and total risk in the market at any one time. Doing this is not difficult, but you must have the discipline to follow through with it on each and every trade.

CREATE YOUR MARKET LENS
Many fail to realize that when you open your charting software and pop on the latest hot indicator or charting tool you've heard works so well, you are extremely unlikely to see much success from it. This is because an indicator on a chart does not provide you with a market lens to trade from. Your market lens comes from experience. It comes from knowing how the market behaves around your chosen framework.

There are many traders that are profitable with various indicators or tools such as fibs, pivots, price channels, MACD, etc. But the tools they have chosen are not what is making them profitable. A common theme between successful traders is that they have the experience of seeing how the market behaves around their chosen tools and framework, day in and day out. The only way to achieve this is to stop jumping between tools and select those that are based on logical reasoning, understand how they work, then spend time in the market experiencing them.

OPERATE LIKE A SURGEON
It should be your goal to take your pips out of the market with precision, the same precision a surgeon must use with his scalpel. Traders who don't treat each trade as a business decision by calculating their risk and defining entries and exits, open themselves to big losses when a trade goes bad.

Once again it is a novel concept which you will hear again and again, but for some reason it is difficult for many traders to exercise the discipline to follow a plan for each trade. Instead what often happens is what I call the "Lazyboy Trade." The trader sees a potential set-up, Decides on some arbitrary sum to buy with a quick guesstimate, then carelessly gets in the trade without analyzing risk and having an exit strategy. The Lazyboy Trade may work out a few times solely because of luck, but eventually the trader wakes up from a nap to find themselves under water in a position and that's the end of their trading career. Now there's nothing wrong with trading from your Lazyboy, but be sure you never partake in the Lazy Boy trade and you must exercise discipline each day to keep your account healthy.

MAINTAIN YOUR MIND
Entire books have been dedicated to the subject of psychology and its role in trading. That doesn't mean they are all going to help you, but you should take this as a sign that the subject is not to be ignored. Like a professional athlete must maintain their fitness at a level that allows them to compete at the top, we must maintain our mind because it is relied on each and every day to trade at the top of your game.

This comes down to a few things. First you must understand the role psychology plays in trading. Second you must make it your aim to never stop learning. You cannot get yourself to a certain level and then become complacent. Your entire career in this industry will be a learning experience. Until the day you stop trading you must be prepared to learn lessons from the market and be willing to do R&D and testing of newly gained knowledge, just as a business would Invest in R&D.

EXPECT THE UNEXPECTED
I'm writing this at the end of 2008 which has been quite a wild year in the markets. We've seen bank runs followed by bail-outs, brokerage bankruptcy's, government intervention in free markets, housing bubbles exploding, and a global deleveraging of the financial system of historical proportions. At the beginning of the crash it seemed like every other week the market was being saved by rumors of Warren Buffet buying out struggling companies. Now we see pundits questioning the savvy of the oracle himself as he loses large sums on the same derivatives he once criticized as a bad idea and sees his prized AAA credit rating for Berkshire being threatened. Did anyone expect to see that?

These are indeed interesting times, but there is one thing every investor needs to learn. Expect the unexpected and do not get wrapped up in the euphoria of those around you. There will always be bubbles, crashes and threats to your profitability, but as long as you maintain and objective outlook and think for yourself you will have a feast when there is famine for those who are caught up in the hype.


Allow Yourself To Succeed
By putting in the effort to BECOME a trader you allow yourself the opportunity to one day evolve from saying "I am going to become" a trader to "I am a trader." And that is the ultimate reward.

To say "I am a trader" is a great privilege and achievement, it means you have done something that around 95% of those who tried could not. Congratulations to those who can make this statement and for those just beginning this journey start your evolution by allowing yourself to BECOME a trader.

Good Luck to all,
Jeff

Hi Bobokus,
Like yourself, i only trade the GBPUSD pair. I do look at Fib levels but perhaps i have not reached your level of competence to trade exculsively using them. I incorporate the daily pivots( floor trader type).
I would be grateful for your insight into Cable and how you use Fibs.
There is a very generous guy on this site by the name of GOODTHINGS, who has done tremendous amount of research on this topic. Perhaps you might benefit from his extremely through work.
Many Thanks.
Adam
Be Good And Good Will Come To You.

I like to start with the Daily chart and look for the last trending move that encompasses the rest after it. This same chart we will zoom down to the 1hour timeframe but first we need to get set up.
I reprogrammed my Fib tool to the following settings for this single fib on the daily chart.

0.0 Daily Low
1.0 Daily high
.809 Daily R1
.618 Daily Long
.50 Daily pivot
.382 Daily Short
.191 Daily S1
1.34 Daily Target 1
1.55 Daily Target 2
-.34 Daily Target 1
-.55 Daily Target 2
This fib i will normally have red in color, since it will hold the most weight.Should look something like this

Next once another trending move has been established i like to pull a fib here. I should mention that I always draw my fibs from top to bottom and once you set your fib tool up this way you will always pull top to bottom. I know there is alot of traders who pull them differently but with this setup we have eliminated the need ...simplifying them.Back to the subject If another trending move has been established since the larger trending move this i call an Intermediate since it has not broken the 1 or 100 level of the first. With the same settings as before but renamed draw these on your chart.

0.0 Intermediate Low
1.0 Intermediate High
.809 Intermediate R1
.618 Intermediate Long
.50 Intermediate Pivot
.382 Intermediate Short
.191 Intermediate S1
Same extensions as the previous fib.(optional)

Now this can be done 2 different ways. You can leave you daily chart as it is to use it as a reference and open another now, or simply add the remainder fibs as i do, the color coding and renaming help but it may be too much clutter for some.
Switch chart now to 1 hour timeframe if you dont feel it will be too much clutter
Next i like to establish the trend, the easiest way for me to describe how to someone new is to place a 62 simple envelope on your 1 hour chart deviation (0.05). what you are looking for is the price break of the envelope that continued into a trending move, now once price has rebroken the 62 envelope this particuler trending move is over.By broken i mean a candle opening. What this tells you is price will most likely go into a ranging period now until some news or event occurs to push it into another trending move.
This set of fibs we base on what this tells us and we look for price to breakout of this set to let us know we could be in another trending move. Sometimes it is only 1 day sometimes it is 10 days or more there is no set timeframe that price will be in a trend but Fibs can help us trade no matter what direction price is going because we do not care which way it goes we are merely riding along.We do not take trades off the 62 envelope , only reference it to price. This set of fibs I name the Range set, same settings as before but i like to leave the extentions on this set. We look to place it in the same manner as before but using reference to the envelope and the last crossing that encompasses everything after it.

What are the Range Fibo? I was able to write an indicator to display these Fibo lines for us automatically.

Now we zoom in a little more to the trading view and place what I use as Intraday. For the most part it will be placed on the high and low of the previous day ( or the last daily swing on the 1 hour chart)to give us a price projection into the following day.The settings are the same just renamed and we definately want the extentions left on this set as it is a price range guage to how far price can travel in a given day, sometimes higher or farther but very rarely. From this set we establish our trading zone...where we need price to go to get the best price for entry.The trading zone is the area between the 61.8 and the 38.2 retracements, The ideal trade is for price to retrace to this zone and breakout from there and that is you entry. There are a number of factors that you must realise before trading or entering a trade, the most important being able to read price action and i think this is the hardest part to learn along with candle formations as they can keep you out of a bad trade that you think you get a good entry for. The only way to learn this is practice trading this method or whatever it is you use and it will become natural, The other part is sticking to your plan...You have to have a plan or you are just pushing the buttons randomly.I plan each trade for the following day before the open. I also have found that trading a currency over and over you become somewhat custom to that currencies tendancies. Another factor i use is time of day i do not normally trade the asian session as it is just unreliable.London session usually sets the tone for the day and the US session either reverses it or continues it.

I see it now. The Range Fibo is like the weekly fibo. Attached is the indicator. For intermediate and range fibo, you have to draw them manually.

From here we make our price projection for the next days trading. I highlighted the trading zone to make it more clear what we will be doing. I was looking for price to enter this zone and it did. what we got was one false breakout then price went short.Now once price enters this area and breaks out of it we need to follow price action closer and use what i call an inner fib or swing set.If youll notice the lime set of fibs i placed here you can see that price makes the trading zone and breaks out of it long, what we are watching is ,what does it do as it tests the fibs from the swing set.It could not reach the 50 fib (pivot) giving us an early sign to exit if we are long.Once it was rejected there you focus your attention to the short side and the extentions...they are telling you where price is going.

Now i like to move the swing set around sometimes to give me a better view of what is going on and why price seems to stall or reverse, in this cae we want to pull the high of the swing set to the high where price was rejected and look to the extentions now to see where it has potential to move too.And there we have it price has stalled at the extentions and if we were short we have exited and out for the day.This was a sad day as far as range I can only guess its the holiday here in the US but we have been expecting ranging since we crossed the envelope several times now without a clean breakout.

Ive seen the threads by Goodthings and I applaud him on his efforts I know the time and effort it takes to research this market.

Wow that was fast, im sure it can help others to get the fibs place on thier charts....thank you your efforts are definately appreciated!

Most likely price has consolidated and im done for the day.I will redraw and make my projections for tomorrow and get those posted later...around 7pm Central time.
Any questions feel free..

Hi there Bobokus!

Well, I would like to thank you for sharing this technique, though apparently there has not been a lot of feedback; I know what this is, so I would like to encourage you to keep up sharing.

I really admire people who share things here, maybe because I lost that desire some time ago.

Good luck and wish you the best!

iiivb

Thanks for the encouragement, and yes not many will notice the importance of what im showing here I think for the most part traders have become dependant on Custom indicators and ever changing methods but me I like what works. Becasue in the end its all about how much you put in the bank

This is not a recommendation to trade merely my thought on the next days trading and what I personally will be looking for. We did get some action late this afternoon and price is very close to where i want it..very early. Price needs to test the resistance from the stair stepping down move today, and may already break short its just kinda early for that. 2.0373 has already been tested and a failure occured (1st attempt?).... Waiting for price to enter the area between the 38.2 (Short) and the 61.8 (Long) of the Intraday fib, then a decision can be made once price breaks from there, since we know we are ranging you can forget using the extentions as targets or exit points. The only thing to suggest price can travel that far is a clean break of the low. My bias is neutral untill the low of thursday can be broken or the high of friday gives way, so in the meantime if we get the test of resistance dont look farther than the S1 on a short and the R1 fib levels tonight. If no test of resistance occurs your left with taking the break of the low which is very dangerous in a ranging condition.Just be aware of that is all.

Long on a break of 2.0399
Targeting 2.0420/2.0440
----------------------------
Short on a failure of 2.0373
Targeting 2.0330/2.0317

Price action will detirmine holding the trades on a clean breakout in either direction from there use Intraday Targets as exit points

This is not a Fibonacci analysis but it could help:

"Daily GBP/USD with double -ascending/descending- Andrew's Pitchfork"

iiivb

Since ive developed my strategy with fib's ,ive never looked at anything else. If they ( andrews pitchforks) work for you and you understand them well enought o trade them then that is your calling. Once you find something that works for you stick with it.

Here you are Bobokus!

iiivb

Don't think I want to mess-up with your thread; I know this is yours and your technique is being discussed here... I just wanted to bring-up some feedback... hope doesn't bother you...

iiivb