The Fibonacci levels are a very powerful tool in trading forex. They can be traded in isolation or in combination with other signals, for example candlesticks, indicators or chart patterns. In this book we will use confirmation signals for entry and exit points. (Chart Patterns and Candlestick Patterns are covered in more detail in "Guide to Prof able Forex Day Trading" which is available from www.forextechniques.com).
Buy setups include bullish engulfing candlestick, morning star, tweezer bottom, double bottom and a break of the high of an inside bar. Sell setups include bearish engulfing candlestick, evening star, tweezer top, double top and a break of the low of an inside bar
The methodology will be demonstrated using real examples using charts and explanations.
One can apply these methods on any time frame from 5min charts through to weekly charts.
When putting Fibonacci levels on the charts, one must look back on each time frame for significant highs and lows. This may involve lookng back days and even weeks. There are traders trading all the different time frames so Fibonacci lines drawn on weekly or monthly charts will affect the market. Convergence of different Fibonacci levels may occur from levels paced on the different time frame charts. Where convergence occurs, the levels become more significant. It is important to look for convergence with Support and Resistance Levels and Trendlines.
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