John T. Jackson described a concept called "Zone Probability Pattern Analysis," in his book Detecting High Profit Day Traders in the Futures Markets. In his book, he describes the dynamic statistical analysis of "Fibonacci Zones" using Open, High and Close to find high percentage support and resistance zones for the entire trading day.
Robert Krausz has completed extensive analysis on "High Probability of the Fibonacci Zones" (HPFZ) concept by using "Probability Matrix." Krausz used various close and open combinations as price moves from zone to zone to achieve the highest probable Open to Low combination for the day.
In this chapter, I present how I use Fibonacci Zone Pivots for my trading. I use HPFZ zone concept as boundaries for trading key support and resistance areas. For additional analysis, please read J.T. Jacksons' book on Zone Pattern Probability Analysis (See References)
Computing FibZone pivot starts with calculating the pivot (High+Low+Close)/3 for the current day and then projecting the "zone pivots" for next day. Adding daily range and its multiples to this pivot point gives various potential resistance and support levels. The boundaries of these resistance/support levels are marked as FibZones. An extensive study has been done on the relationship between yesterday's close and today's open within these zones to find a potential daily "close" for the current day. I use FibZones in my personal trading and have found them to be valid and useful. My usage of HPFZ is limited to finding intra day resistance and support areas and not for the zone analysis.
Pivot Point (PP) = (H+L+C)/3 Daily Range (DR) = (H-L) First Resistance (Rl) = PP + 0.5*DR Second Resistance (R2) = PP + DR First Support (SI) = PP - 0.5*DR Second Resistance (S2) = PP - DR
Resistance Band (RBI) = PP + 0.618*DR Support Band (SB1) = PP - 0.618*DR
Resistance Band (RB2) = PP + 1.382*DR Support Band (SB2) = PP - 1,382*DR
Was this article helpful?