My system is based on two statements -
Fact 1: "First retraces gives the best entry point for a trade"
Fact 2: "A wave continues until it retraces"
There are a few assumptions which I have made while formulating this strategy-
Assumption 1: There is high probability that price will end its retrace at 50% Fibonacci level. And will start travelling in original direction from here. If the retrace goes beyond 50% level(let's say 63.2%) then it is no longer a retrace and we would consider uptrend has ended.
Assumption 2: There is a high probability that when the trend is coming to an end it will form a double top or double bottom.
Consider that the price was in consolidation for some time and has just shot up and you are pretty sure that this is the start of a new trend. So, where do you think is the best long entry? I would like you to give a little thought to this. Think about the safest point of entry and also the most profitable one. This would be at 50% Fibonacci level. Based on Assumption 1, there is a high probability that the price will bounce back from here and based on Assumption 2 it will reach at-least the previous high to make a double top before going down(if the uptrend has ended). Looking more closely on Assumption 1 and 2 the stop loss can be at 63.2% Fibonacci level and the TP at the previous high.
What I have tried to explain till now will form the bias for a trade and will also provide an approximate entry point and TP along with SL. Now we will look at timing aspect of the trade. For this we will look at Price Action at 50% Fibonacci level. Following are my favorite:
1. 3 candle pin bar with volume
2. Inside bar with volume
3. Double bottom/Top with volume
You can use other ways to assist you in finding the right timing, but I have found that these three PA pattern when combined with volume form a potent mix to identify a reversal.
Above would form the complete strategy.
Other things which will help you with this strategy are:
1. Always be aware of the ADR. Do not take trades when the ADR of the day has been reached.
2. Always be aware of high impact news and events. Do not trade during high impact news and events.
3. Always be aware of the highest volume for the day. Was it at a relative high or a low.
I will try to post some screenshots soon which will help in explaining this properly.
Please feel free to comment/criticize/contribute to this system.
Rav
Fact 1: "First retraces gives the best entry point for a trade"
Fact 2: "A wave continues until it retraces"
There are a few assumptions which I have made while formulating this strategy-
Assumption 1: There is high probability that price will end its retrace at 50% Fibonacci level. And will start travelling in original direction from here. If the retrace goes beyond 50% level(let's say 63.2%) then it is no longer a retrace and we would consider uptrend has ended.
Assumption 2: There is a high probability that when the trend is coming to an end it will form a double top or double bottom.
Consider that the price was in consolidation for some time and has just shot up and you are pretty sure that this is the start of a new trend. So, where do you think is the best long entry? I would like you to give a little thought to this. Think about the safest point of entry and also the most profitable one. This would be at 50% Fibonacci level. Based on Assumption 1, there is a high probability that the price will bounce back from here and based on Assumption 2 it will reach at-least the previous high to make a double top before going down(if the uptrend has ended). Looking more closely on Assumption 1 and 2 the stop loss can be at 63.2% Fibonacci level and the TP at the previous high.
What I have tried to explain till now will form the bias for a trade and will also provide an approximate entry point and TP along with SL. Now we will look at timing aspect of the trade. For this we will look at Price Action at 50% Fibonacci level. Following are my favorite:
1. 3 candle pin bar with volume
2. Inside bar with volume
3. Double bottom/Top with volume
You can use other ways to assist you in finding the right timing, but I have found that these three PA pattern when combined with volume form a potent mix to identify a reversal.
Above would form the complete strategy.
Other things which will help you with this strategy are:
1. Always be aware of the ADR. Do not take trades when the ADR of the day has been reached.
2. Always be aware of high impact news and events. Do not trade during high impact news and events.
3. Always be aware of the highest volume for the day. Was it at a relative high or a low.
I will try to post some screenshots soon which will help in explaining this properly.
Please feel free to comment/criticize/contribute to this system.
Rav
