Combining Fibs with Candlesticks
If you have been having to pay attention at school, you’d know by now you can mix the Fibonacci tool with support and resistance levels and trend lines to produce a simple but super awesome buying and selling strategy.
But we ain’t done yet! Within this lesson, we are likely to train you the way to mix the Fibonacci tool together with your understanding of Japanese candlestick designs that you simply learned in Grade 2.
In mixing the Fibonacci tool with candlestick designs, we’re really searching for thorough candlesticks. If you’re able to tell when purchasing or selling pressure is exhausted, it can provide you with an idea of when cost may continue trending.
We at tradeadvisorpro.com prefer to give them a call “Fibonacci Candlesticks,” or “Fib Sticks”. Pretty appealing, right? Let us have a look at an example to create this clearer.
Here is a 1-hour chart of EUR/USD.
The pair appears to be in a downtrend the past week, however the move appears to possess paused for a little. Maybe there is an opportunity to obtain this downtrend? Guess what! I know you know what this means. You’re ready to go ahead and take Fibonacci tool and get the job done!
As you can tell from the chart, we have set our Swing High at 1.3364 on March 3, using the Swing Low at 1.2523 on March 6.
Becasue it is a Friday, you made the decision to simply relax, take an earlier day off, and choose whenever you wanna enter once you discover the charts following the weekend.
Whoa! When you sprang open your charts, the thing is that EUR/USD has increased a great deal from its Friday closing cost.
As the 50.% Fib level held for a little, purchasers eventually required the pair higher. You choose to wait and find out if the 61.8% Fib level holds. In the end, the final candle was pretty bullish! You never know, cost might just keep shooting up!
Well, are you going to see that? A lengthy legged doji has created right smack around the 61.8% Fib level. Should you compensated attention in Grade 2, you’d realize that it is really an “exhaustive candle.” Has purchasing pressure died lower? Is resistance in the Fib level holding? It is possible. Other traders were most likely thinking of getting that Fib level too.
Are you looking to short? You cant ever know without a doubt (and that’s why risk management is really important), but the prospect of a reversal looks really good!
Should you have had shorted immediately after that doji had created, you might have made some serious profits. Immediately after the doji, cost delayed for a little before heading straight lower. Take a look at all those red candles!
It appears that buyers were indeed pretty tired, which permitted retailers to leap in and seize control. Eventually, cost went completely down again towards the Swing Low. Which was a move of approximately 500 pips! That could’ve been your trade of the season!
Searching for “Fib Stays” can be very helpful, as they possibly can signal whether a Fib level holds.
Whether it appears that cost is stalling on the Fib level, odds are that other traders might have put some orders at individuals levels. This could behave as more confirmation that there’s indeed some resistance or support at this cost.
Another nice factor about Fib Stays is the fact that you don’t have to place limit orders in the Fib levels. You might have some concerns if the support or resistance holds because we are searching in a “zone” and never always specific levels.
This is when you should use your understanding of candlestick formations.
You can wait for Fib Stay with form right below or over a Fib level to provide you with more confirmation on whether you need to place in a purchase.
If your Fib stick does form, you can easily enter a trade at market cost since you have more confirmation that much cla might be holding.