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Attachments: Hourly Fibonacci Method (Day Trading)
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Hourly Fibonacci Method (Day Trading)

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  • #1
  • First Post: Jul 14, 2009 10:47am Jul 14, 2009 10:47am

Hi all,

I believe this day-trade method is very simple and effective. I decide my bias for the day basically using patterns analysis on the Daily chart (also, the Weekly and Monthly charts – if applicable) and price-break of most recent swing high or low on the 4 Hour chart.
I seek trade set-ups on the hourly chart using overlapping Fibonacci levels supported by previous highs/lows and pivot points. My Stop Loss placement is easily determined based on the hourly most recent swing high/low, and I enter trades using Limit Orders.
The 15min and 5min charts are only used to have a clearer view of the Hourly chart price action.

I use this method personally on my live account, and it is inspired by a respected and successful veteran trader. It is virtually a fully mechanical method – except for the simple analyses on the Daily chart and above.

It’s not a get-rich-quick method, neither is it the HOLY GRAIL; and it involves a high level of patience as it doesn’t produce tradable set-ups every day. However, I study the four majors and I usually get an average of about five trading opportunities in a week – depending on the market environment.

As much as I can, I’ll post at least a trade bias, and, if available, trade set-ups on any of the four majors everyday as I carry on my personal trades; I believe we’ll all find this method very rewarding as we familiarize ourselves with it.

Tunji.
  • #2
  • Jul 14, 2009 2:51pm Jul 14, 2009 2:51pm
great ,cant wait to see your charts.
  • #3
  • Jul 15, 2009 8:16am Jul 15, 2009 8:16am
Today on EURUSD – Daily and H4 charts support Long trades, but…

On the Daily chart (attached), we could see the market is in a symmetrical triangle formation. From a longer term perspective, this is a price consolidation phase and it’s probably better to stay out of the market for now. However, from a day-trade perspective, price recently broke the most recent swing high @ 1.4072 (which we’ve highlighted using the blue broken line) upward. This signals the possibility of further upward move. Again, although price is advancing toward the upper part of the symmetrical triangle – a critical resistance area – there’s still room for price to move a bit further upward. Please note we’re only contemplating a Long trade because we’re analyzing the market from a day-trade perspective.
Nevertheless, the upper part of the symmetrical triangle remains a critical resistance area. As a conservative trader, it’s just ok to wait for a clearer coast, or reduce your risk if you decide to seek a Long trade set-up on the hourly chart.

On the H4 chart (attached), price recently broke the most recent swing high @ 1.4014 (which we’ve highlighted using the blue broken line) upward. From a day-trade perspective, this automatically shifts our bias for price movement upward. The green horizontal line @ 1.3910 highlights the most recent swing low, and as long as price stays above it – in the absence of any new and higher swing low – our bullish or upward bias remains intact.

However, we still need our hourly charts – using Fibonacci retracement levels and important support levels – to seek promising areas to take our long positions. Price pattern on the hourly must also be forming higher highs and higher lows. Please note that our aim is to buy a dip in today’s up-trend.

Also, PATIENCE is the key here: we need to patiently wait for the hourly retracement. It might happen, and it might not.
Attached Images
  • #4
  • Jul 16, 2009 4:02am Jul 16, 2009 4:02am
On the Daily chart (attached), price recently broke the most recent swing high @ 1.6379 (which we’ve highlighted using the lower blue broken line) upward. This signals the possibility of further price movement upward. A major resistance level – the GBPUSD pair year high – is @ 1.6744 (which we’ve highlighted using the upper blue broken line). This, however, is hundreds of pips away, so, it’s not in any way an imminent barrier for a Long trade from a day-trade perspective – barring any sudden price surge.

On the H4 chart (attached), from a day-trade perspective, we are in a nice up-trend: price is forming higher highs and higher lows. Price has broken the most recent swing high @ 1.6343 (which we’ve highlighted using the upper blue broken line) upward, and re-testing it. This is another good sign supporting a Long trade.

However, we still need our hourly charts – using Fibonacci retracement levels and important support levels – to seek promising areas to take our Long positions. Price pattern on the hourly must also be forming higher highs and higher lows. Please note that our aim is to buy a dip in today’s up-trend.

Also, PATIENCE is the key here: we need to patiently wait for the hourly retracement. It might happen, and it might not.
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  • #5
  • Jul 16, 2009 4:10am Jul 16, 2009 4:10am
Hi,

Just wanted to let you know there has already been a similar thread using fibs on the hourly, it proved popular and is worth a read. HOpe fully your thread will be as popular, good luck. http://www.forexfactory.com/showthread.php?t=75922

Nick
The customer is always right!
  • #6
  • Jul 16, 2009 5:46am Jul 16, 2009 5:46am
Hi Nick,
thanks for this information, I just checked the thread out. You’re quite right: Dazfx also uses the fib tool on the hourly chart, but, as you’ve probably noticed (or would notice), our approaches are slightly different. The method I use neither requires SMA nor Stochastic Oscillator; all its primary parameters are price based. Also, this method requires overlapping fibs – among a few other parameters – to consider a trade as viable. I find Dazfx approach also insightful and I believe it’ll give FF members the choice of employing the fib tool on the hourly in ways that suit their individual personalities.
And, thanks for your well wishes.

@ neziah
Hope you’re finding this method helpful? I’ve only been able to post the Trade Biases for now – you should be seeing the Hourly Trade Set-ups soon; and that’ll definitely give you a better understanding of the method.
  • #7
  • Jul 16, 2009 6:48am Jul 16, 2009 6:48am


Earlier today, we concluded today’s bias is to go Long.

The Hourly chart (attached) is currently forming a tradable pattern. Price seems to have topped temporarily @ 1.6481. Hence, we expect price to retrace to the area between 1.6418 and 1.6355 (which is the area between the 50% and 100% fib. retracement levels – drawn from the most recent hourly swing low to the current price-top). Let’s seek to buy around this area. If price exceeds the 1.6355 level downward, our bullish bias is no more valid and we enter a no-trading zone. Our primary profit target is @ 1.6514 (the 127% fib. ext.).

Also, if price breaks above 1.6481 (current price-top) before retracing to the buy-area, we’ll have to redraw our Fibonacci tools using a new top & the most recent hourly swing low to determine new potential areas to buy.

The 15min. chart (attached) gives us a clearer view of the hourly price action and the potential areas to buy (please note it’s advisable to set a Limit order ahead of time as price could move down to these level and reverse sharply in our favor)
This chart is rather cluttered but if we look closely, there are a couple of potential reversal levels available. You choose your preferred level based on your personality.

fib 61.8% ret. @ 1.6403;
fib 78.6% ret. @ 1.6382.

Initial Stop Loss @ 1.6353; primary Profit target @ 1.6514 (Please remember to factor in your broker’s pip-spread).

Please note that all these Fibonacci (fib.) levels have other pivots, overlapping fibs or previous highs/lows supporting them (they are the cause of this cluttered chart). As such, price could reverse at any of the points. The issue here is that the deeper the fib level you choose to buy from, the smaller the pips you’ll risk and the more your pip-profit; BUT, also the more the likelihood of you missing the trade as price might not retrace that deep before moving back upward.
You need your own discretion here.

Please keep your risk low. Don’t risk more than 2% of your capital. Personally, I risk about 0.5% per trade; and each trade has a potential profit target of 1% or more – based on my exit levels.
We MUST NEVER assume we KNOW where price is going next!

P.S.:
Similar Short trade and Long trade set-ups are forming on the USDCHF and GBPUSD pairs respectively.
Also, always keep in mind any major news releases. Be wary of possible price volatility during these periods.
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  • #8
  • Jul 16, 2009 10:49am Jul 16, 2009 10:49am
If you’ve not been able to go Long on the GBPUSD based on the Long trade set-up that was posted a few hours ago (using the fib 61.8% retracement @ 1.6403), a new hourly swing low has been formed @ 1.6395; hence, the previous set-up is no more valid. If you took the trade around the fib 61.8% ret., it’s time to move your stop to just under the new hourly swing low @ 1.6395 (Hope you see this post in time, in case price decides to break the swing low downward).
Another signal that is currently weakening our upward move bias is the waving –ve MACD divergence that is about crossing below its signal line. MACD crossing below its signal line will validate the –ve MACD divergence, which supports the possibility of further price movement downward.
NOTE: See the attached hourly chart

Personally, I took this trade @ the fib 61.8% ret.; took some profits when price moved favorably by almost the same amount of pips I risked initially (47pips), and have now moved my Stop Loss for the remaining position to under the new hourly swing low @ 1.6395.
Attached Image (click to enlarge)
Click to Enlarge Name: GBPUSD Hourly - Update 160709.gif Size: 26 KB
  • #9
  • Jul 16, 2009 7:29pm Jul 16, 2009 7:29pm
Good thread tunji . What pairs do you trade ?
  • #10
  • Jul 16, 2009 7:31pm Jul 16, 2009 7:31pm
I see the 4 majors . Tex
  • #11
  • Jul 16, 2009 7:47pm Jul 16, 2009 7:47pm
Quoting tex123
Good thread tunji . What pairs do you trade ?
Thanks Tex, I focus on the four majors: EURUSD, USDCHF, GBPUSD, & USDJPY… Ok, you’ve read it already.
  • #12
  • Edited 3:25am Jul 17, 2009 2:59am | Edited 3:25am
On the Daily chart (attached), price struggled to continue its upward move yesterday, and it closed with a doji candle formation. The doji gave a signal of possible price reversal downward – especially since it formed around the 1.6440 area, which, although offered no distinct high or low, is congested with previous support and resistance levels. To buttress our bearish bias, price recently broke below previous day low @ 1.6355.
The critical support trend-line is still hundreds of pips below the current price level, hence – barring any intense price volatility – we can still conveniently seek a Short trade set-up on the hourly chart, as long as the H4 charts supports a Short trade.

On the H4 chart (attached), price has broken the most recent swing low @ 1.6355 (which we’ve highlighted using the blue broken line) downward. As we’ve probably observed, this swing low @ 1.6355, coincidentally, is also the previous day low. From a day-trade perspective, this is a good sign supporting a Short trade. The white horizontal line @ 1.6481 highlights the most recent swing high, and as long as price stays below it – in the absence of any new and lower swing high – our bearish or downward bias remains intact.

However, we still need our hourly charts – using Fibonacci retracement levels and important resistance levels – to seek promising areas to take our Short positions. Price pattern on the hourly must also be forming lower highs and lower lows. Please note that our aim is to sell a rally in today’s down-trend.

Also, PATIENCE is the key here: we need to patiently wait for the hourly retracement. It might happen, and it might not.
Attached Images
  • #13
  • Jul 17, 2009 3:16am Jul 17, 2009 3:16am
Earlier today, we concluded today’s bias is to go Short.

The Hourly chart (attached) is currently forming a tradable pattern. Price seems to have bottomed temporarily @ 1.6283. Hence, we expect price to retrace to the area between 1.6350 and 1.6416 (which is the area between the 50% and 100% fib. retracement levels – drawn from the most recent hourly swing high to the current price-bottom). Let’s seek to sell around this area. If price exceeds the 1.6416 level upward, our bearish bias is no more valid and we enter a no-trading zone. Our primary profit target is @ 1.6247 (the 127% fib. ext.).

Also, if price breaks below 1.6283 (current price-bottom) before retracing to the sell-area, we’ll have to redraw our Fibonacci tools using a new bottom & the most recent hourly swing high to determine new potential areas to sell.

The 15min. chart (attached) gives us a clearer view of the hourly price action and the potential areas to sell (please note it’s advisable to set a Limit order ahead of time as price could move up to these level and reverse sharply in our favor)
This chart is rather cluttered but if we look closely, there are a couple of potential reversal levels available. You choose your preferred level based on your personality.

fib 61.8% ret. @ 1.6365;
fib 78.6% ret. @ 1.6387.

Initial Stop Loss @ 1.6418; primary Profit target @ 1.6247 (Please remember to factor in your broker’s pip-spread).

Please note that all these Fibonacci (fib.) levels have other pivots, overlapping fibs or previous highs/lows supporting them (they are the cause of this cluttered chart). As such, price could reverse at any of the points. The issue here is that the higher the fib level you choose to sell from, the smaller the pips you’ll risk and the more your pip-profit; BUT, also the more the likelihood of you missing the trade as price might not retrace that high before moving back downward.
You need your own discretion here.

Please keep your risk low. Don’t risk more than 2% of your capital. Personally, I risk about 0.5% per trade; and each trade has a potential profit target of 1% or more – based on my exit levels.
We MUST NEVER assume we KNOW where price is going next!

P.S.:
Always keep in mind any major news releases. Be wary of possible price volatility during these periods.
Attached Images
  • #14
  • Edited 12:40pm Jul 17, 2009 12:37pm | Edited 12:40pm
Tunji, very instructive thread. Keep it up. Like to know the times you trade and whether you take into consideration current market conditions. Cos as I see it we are in earnings season with the market directioneless cos the mutual funds are on the sidelines thus we have a lot of false breakouts and quick reversals. Not really a market to implement any trending strategy. Its all about buy at support sell at resistance. If you have noticed the markets only moves nicely at the beginning of the sessions. London 0600 gmt, New york 1200 gmt and Asian 2400 gmt. Aside these times the makets go nowhere.
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  • #15
  • Jul 17, 2009 5:10pm Jul 17, 2009 5:10pm
Quoting okehiedon
Tunji, very instructive thread. Keep it up. Like to know the times you trade and whether you take into consideration current market conditions. Cos as I see it we are in earnings season with the market...
Thanks Okehiedon. Usually, I trade the full London/early New York sessions (06:00GMT – 16:00GMT). Regarding current market conditions: Yes! I take all market conditions – both fundamental and technical – into consideration, but since my trading approach tends heavily toward technical analysis, I focus primarily on the “stories” the charts are telling. All the same, your observation of a “directionless” market has been visible, particularly, on three of the four major pairs (EURUSD, GBPUSD & USDCHF) since the beginning of June; and, as you’ve also rightly observed, it has made successful implementation of trending strategies quite a difficult – though not impossible – task. However, I believe that, with proper trade management of a trending day-trading method, you could still make modest profits while we wait for a more auspicious market environment.On the other hand, if you’re a successful veteran-trader with years of experience under your belt, you might possibly have a number of strategies in your trading toolbox – including one that is more suitable for a consolidating market.
  • #16
  • Jul 17, 2009 6:09pm Jul 17, 2009 6:09pm
I employ many of these methods in my trading. In fact, they make up about half of my toolset.

So you use Fib retracements to enter but you don't use targets to exit??

It would amaze you how many times price will break out of what I like to call the 'zone' (between 38 and 61) and reach the target to the pip and then begin the pullback process again, at which time you redraw the fib from the breakout to the target......after a while you can't help but see the market as just an infinite cycle of fibs running their course, from the tick chart to the monthly...

If you would like to know more and maybe expand your toolset I highly suggest checking out these two threads. This is basically the proverbial 'holy grail' for those that actually want to learn how to TRADE, rather than learning to follow lagging indicators that only inhibit your ability to actually the learn the market and utilize the most important indication of market direction: Price.

Skunny's Indicator Free Trading:
http://www.forexfactory.com/showthread.php?t=60272
Bobokus' Fibonacci Trading:
http://www.forexfactory.com/showthread.php?t=50767


Have a nice weekend!

Justin
  • #17
  • Jul 17, 2009 6:44pm Jul 17, 2009 6:44pm
  •  Nimrod
  • | Joined Oct 2008 | Status: Energy and persistence conquer all | 168 Posts
Your approach is very educational and I believe this thread is good place to learn.Keep up the good work.
You learn more when you teach.
  • #18
  • Jul 17, 2009 8:26pm Jul 17, 2009 8:26pm
Quoting jpat1023
I employ many of these methods in my trading. In fact, they make up about half of my toolset.

So you use Fib retracements to enter but you don't use targets to exit??

It would amaze you how many times price will break out of what I like to call the 'zone' (between 38 and 61) and reach the target to the pip and then begin the pullback process again, at which time you redraw the fib from the breakout to the target......after a while you can't help but see the market as just an infinite cycle of fibs running their course, from the tick chart to...
Hi Justin, thanks for your comment. I have exit levels – as you would see in my trade set-ups analyses above.
You’re absolutely right about your allusion to the infinite numbers of ways market expresses itself: regardless of the tool and system we employ, every market moment or trade is unique in itself. The best traders respect that, and they know their successes are based on their consistency and unwavering faith in their proven edges, which, among other things, must put into consideration reward/risk ratio – not just win/loss ratio.

To thrive in this market, we definitely must not stop learning. Thanks for your references; I’ll definitely check them out.


You too, have a nice weekend.
  • #19
  • Jul 17, 2009 8:33pm Jul 17, 2009 8:33pm
Quoting Nimrod
Your approach is very educational and I believe this thread is good place to learn.Keep up the good work.
You learn more when you teach.
Nimrod, thanks for your kind words; I appreciate them. Have a restful weekend.
  • #20
  • Jul 18, 2009 7:27am Jul 18, 2009 7:27am
Quoting Tunji
Thanks Okehiedon. Usually, I trade the full London/early New York sessions (06:00GMT – 16:00GMT). Regarding current market conditions: Yes! I take all market conditions – both fundamental and technical – into consideration, but since my trading approach tends heavily toward technical analysis, I focus primarily on the “stories” the charts are telling. All the same, your observation of a “directionless” market has been visible, particularly, on three of the four major pairs (EURUSD, GBPUSD & USDCHF) since the beginning of June; and, as you’ve also...
Tunji, instructive response will be following your thread you seem to have a good understanding of the markets, by the way how long have you been trading forex
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