Fibonacci Daily Cycle Strategy
The daily Fibonacci pivot strategy uses standard Fibonacci retracements together with the daily central pivot levels to find trade entry points. My preferred levels are the 38% or 50% Fibonacci levels where they meet the daily central pivot. The examples below show entry points at the 38%, 50%, and 62% Fibonacci retracement levels in confluence with the daily central pivot. For more, read about Reversal Zone Trading Strategy.
As with all free forex strategies, there are many possible interpretations and variations. My particular interest in this strategy is as follows:
In the Fibonacci pivot strategy, look for an entry on any currency pair where the average true range of the past five days was exceeded during the previous day’s trading session.
At the start of the current trading session, draw the swing points:
- From the previous day’s low up to the high, if price is currently above the current day’s central pivot.
- From the previous day’s high down to the low, if price is currently below the current day’s central pivot.
Look for confluence between the Fibonacci retracement levels and the daily central pivot.
If price bounces at a specific confluence point, you either enter the market or wait for a confirming candle signal at the confluence before entering. Entering before a confirmation signal appears is clearly riskier, but this approach can offer a larger reward relative to the risk.
How the Fibonacci pivot strategy works
The first chart shows a long entry at the confluence of the 38% Fibonacci retracement and the daily central pivot:
You could have entered in either direction here — either by buying on the first touch of this level, or by waiting for a morning star candle to form. Both entry points would have given a potential target at the 127% Fibonacci extension level, which was reached easily.
The suggested stop loss for these trades sits one Fibonacci level beyond where you deal. In this case it might reach the 50% retracement level, plus a few extra pips as a buffer.
The next trade shows the reverse setup of the previous one, with a sell occurring at the confluence of the 38% retracement and the daily central pivot:
This was a strong setup given the large drop in the previous trading session. That drop points to a change in sentiment that would add weight to the decision to sell.
A sell after a long run the previous day
This time the sell happens at the 50% retracement level, even though it does not converge perfectly with the daily central pivot. Even so, a clean evening star pattern formed, with both the daily central pivot and the 50% retracement level being respected before entry.
The last example shows the central pivot meeting the 62% retracement level, along with old lows on the left of the chart:
This is an example of the fact that any pivot level can be used in confluence with the daily central pivot. In this case price bounced to retest the entry level again the next day, but profits should have been taken from the trade by then, if you had not already exited with the full profit.
As always with any new strategy, and especially free forex strategies, remember to fully backtest and forward-test on a demo account before you start trading this particular strategy, if you decide to trade it.
Identifying the zones at the top and bottom of the chart is the first step in building the daily Fibonacci pivot strategy with a compass-like motion, where three curved lines are drawn at 38.2%, 50%, and 61.8% from the chosen point. These lines project support and resistance levels as well as trading ranges.
[AFF-CTA: pending]
التعليقات مغلقة.