Hi southernmind,
I love fibs too, but I can not figure out a consistent trading method, for example, we got a up swing, you draw a fib from low to high, then price start move in the defined range, question.
1) If price retrace to 38.2, what do you do, trade reverse? trade break? same question about 50 & 61.8.
2) price retracement over, back to the swing high, what do you do? trade reverse? trade break?
3) price break the swing high, I will expect a retest the high, then go to the outer fibs. Maybe I can trade this. But how do you define break, how far? Maybe price just test the swing high, then go back.
I really want to figure out some consistent plan, because when price moving, you watch the fibs, any thoughts can come to your mind. So I see you study fibs with passion, and consistent put effort on it, could you give me some directions? thanks.
First of all, I have no idea how price will react when it reaches a certain level. I'm intelligent enough to know and say that. With that being said, three things that will help in making a decision when using fibs/trendlines/pitchforks is price momentum, price action (ranging or trending), and support & resistance (swing highs & lows, 00 & 50 price levels). Some of the best trades to take, in my opinion, is where price hits the intersecting point of any combination of fib lines/trendline/pitchfork. As for fibs themselves, you can usually count on price meeting resistance at a 50% fib line (not always). With pitchforks, there are times where price will make a perfect bounce off a line or break it anywhere from 5-30 pips (sometimes even more) and return to it. You also have to consider how many times price has been at one of these lines and how it has reacted to it. If you can catch it hitting one of the lines for the first time (especially on the larger timeframes), more than likely there will be some sort of resistance which could turn into a reversal (big or small). Again, all of this has to be taken into consideration with the three factors I previously mentioned.
There are many different scenarios out there. It pays to be patient in most cases. You just have to make your best guess and have luck as a friend.
Uh-oh....price has fallen outside the pitchfork and has been hanging outside it for several hours. It is also encountering resistance at the 61% fib line on the hourly and the descending trendline on the daily. If it happens to go higher, look for failure to re-enter the pitchfork for a potential short trade. If it breaks within the pitchfork it should receive some support from it to indicate further upward movement. Since price has broken the trendline once, it could very well do it again.
cool going to watch that thanks... been looking for an excuse to short the cad anyway
