Remember one thing; this Fibonacci trading strategy will not work alone in an accurate way.
First, I will explain
What I Had Understood About The Fibonacci Trading Strategy?
After I will explain about with, what indicators this Fibonacci trading strategy will work more accurately.
We have studied lagging and leading indicators; with the help of these indicators, we can get trading signals, and we can enter and exit the trade based on that.
But in this article, we will learn about the trading tool, and it is an indicator.
That tool is Fibonacci (retracement tool).
When we apply this tool, we get some levels known as Fibonacci levels; these levels are beneficial and can be a very effective component of your trading strategy.
Leonardo Fibonacci is a great Italian mathematician who first observed the specific ratio of a number series recorded as describing the natural proportions of the things in the universe, including price data.
All the Fibonacci ratios rise from the number series, and these series of numbers are derived from the starting with one and followed by two and then adding 1 and 2 equals three the third number and adding 2+3 =5 the fourth number.
0,1,2,3,5,8,12,22,34,55,89,144,233……
By adding the two numbers, the result will be the following preceding number.
If we divide any number by this preceding number, the number is always 1.6.
For example, if we divide 5/3, we get 1.6; if we divide 144/89, we get 1.6.
And the inverse of this ratio is 0.618, and these two ratios refer to as GOLDEN RATIO.
All the golden ratio levels are essential, and the reason is that traders worldwide are watching these levels and placing buy or sell orders at the zones.
So these levels act as important support and resistance levels.
We have to identify, swing low and swing high of the current trend.
To know the Fibonacci trading strategy retracement level.
Applying this tool to the market will follow either an uptrend or downtrend, golden ratio support, and resistance levels.
For example, when prices are taking support at 0.5 level of the Fibonacci tool, we have to place the buy order of the stock, where the prices are facing the support.
Stop-loss should be below the support level, and profits should be according to your risk-reward ratio.
When prices are facing resistance at 0.5 level of the Fibonacci tool, we have to place the sell order of the stock, where the prices are taking the resistance.
Stop-loss should be above the resistance level, and profits should be according to your risk-reward ratio.
Though Fibonacci is an essential tool, there was a problem with it: the ultimate support level, where the corrections occur.
So we have to add other indicators like moving average, Bollinger band, and MACD to get our entry signal and confirming the positions.
Another problem is that market will not resumes its uptrend after taking the support.
For example, if the prices have taken support at the 38.2% level, but if prices breach this level on the downside again, then we may not have clarity about where the prices will retake support before resuming the uptrend.
So we should always place the stop loss below our entry-level.
Another problem is that we cannot identify the current swing because there are many swings in the current trend.
There are many short and long swings.
I suggest choosing the current swings on the higher time frame chart.
How to make use of these Fibonacci levels?
If you are a positional trader, your chart should be weekly, daily and hourly charts.
We have to find the support levels, and we will use Fibonacci to know the retracement levels,
We have to apply the Fibonacci trading strategy from low to high.
We have to mark the levels close to our position because those levels are much significant.
Using the Fibonacci trading strategy alone will not be able to get a probable trade, by using the following indicators, you will be able to get accurate trade.
These are the indicators for Fibonacci trading strategy.
- Moving Average
- Bollinger Band
- Relative Strength Index (RSI)
- volume weighted average price (vwap)
How to Trade in stock Intraday with the help of Moving Average: Fibonacci trading strategy
Trading by using the moving average will be accurate
Enter the long trade, when a cross-over of moving average takes place towards the bullish side.
And your stop loss should be the day low.
And your target would be according to your risk-reward ratio.
Enter the short trade when a cross-over of moving average takes place towards the bearish side.
And your stop loss should be the day high.
And your target would be according to your risk-reward ratio.
I suggest the 5 minute time frame for the intraday traders.
How to Trade in stock Intraday with the help of Bolinger Band: Fibonacci trading strategy
Bolinger band will give the early signal, whether the market is moving towards the bullish side or bearish side.
If the Bolinger band is in a narrow position, that means contracting, and the signal is that market is in consolidation mode, so do not enter any trade while the market is in consolidation mode; wait for the scrip for picking movement.
The signal of whether the market is picking movement is, our indicator Bolinger band will expand, or it will show some expansion moment.
You can enter the trade after the expansion of the Bolinger band.
Remember Bolinger band will show whether the market is in bullish mode, consolidation mode, or bearish mode.
When the 5-minute candle has opened outside the Bolinger band, that trade will not be much effective.
Trade will be effective when the candle stays on the inner side of the Bollinger band.
I will trade when the candle is on the inner side of the Bollinger band.
I will avoid trading when the candle opens outside the Bollinger band.
How to Trade in stock Intraday with the help of Relative strength index (RSI): Fibonacci trading strategy.
The relative strength index will be helpful to take the trade or exit from the market.
RSI will confirm to take the trade or exit.
If the RSI level is above the value of 50, then it is the most probable of entering the buy trade.
If you had entered the trade above the RSI 50 level, In the middle of the market, if the value of the RSI drops below 50 (It will occur in rare cases), In that case, the trade may not perform most accurately.
Remember one thing; all indicators will show the direction of the market.
Volume Weighted Average Price Strategy (VWAP): Fibonacci trading strategy.
It is an essential technical indicator for the day trader.
VWAP is a moving average that takes into account the volumes of shares been traded.
VWAP tells who is in control of price action, the bulls or the bears.
Above VWAP, buyers control the price, and below the VWAP, sellers are gaining control over the price action.
Professional traders buy and short the stock near the VWAP levels.
After the opening, the stock will trade heavily in the first 5 minutes.
In a gap-up stock, if there is a buying interest by the institutional traders, the scrip will trade above the VWAP and move high”s.
So it is an excellent opportunity to buy when price takes support at the VWAP.
If the price rejects VWAP and starts to move down, it means many traders are selling the stock for profits, so it is an excellent opportunity to sell the stock short when the price takes resistance at the VWAP.
If there were no interest in the stock from institutional buyers, the scrip would move in sideways near the VWAP level.
We should stay away from the stock in this case.
If stock finds support at VWAP, we can buy the stock.
If a stock faces resistance over VWAP, we can short sell the stock.
Stop-loss can be placed above and below the VWAP, and the target will be the following support and the next resistance.
We can confirm our buying position by analyzing the 15-minute chart.
Price should be above the VWAP in buying position.
Price should be below the VWAP if we are shorting the stock.
I recommend waiting for at least half an hour by taking any position if you are not confirmed with the direction.
Using a 15-minute chart will confirm the direction of the stock, but for entering the trade, use a 5-minute chart.
How To Pick The Stocks For VWAP Trading Strategy? Fibonacci trading strategy
While trading the VWAP trading strategy, I always choose the stock that had opened the gap up above the 4%.
I always choose the stock opening the gap below the 4% for the opening gap down strategy.
Average volume should always be more significant than 100k because we want the higher volume of the stock to move.
We should not always be stuck with moving fewer stocks.
For the Intraday VWAP trading strategy and Fibonacci trading strategy, observation of the candlestick patterns is more important for the trade probability.
Catalyst is an essential character to be considered for day trading.
With a strong catalyst, a stock can move 10 to 15 % in a single day.
If a catalyst is a negative side for the stock, it will fall.
If a catalyst is positive for the stock, it will rise.
But for some time, a single catalyst behaves as negatively and positively for the different stocks.
For example, there was news in the market for merging three banks like Bank of Baroda, Vijaya Bank, and Dena bank.
The next day, Baroda and Vijaya bank had opened the gap down, and Dena bank had opened in the gap-up.
The same catalyst is acting both negatively and positively at the same time for different stocks.
You can scan the stocks based on the news for the gap up and gap down strategies.
VWAP trading strategy and Fibonacci trading strategy are the most probable and profitable, and they may give a 1:2 and 1:3 risk-reward ratio.
VWAP and the Fibonacci trading strategy will be available in the trading view platform most accurately.
For intraday VWAP trading strategy and Fibonacci trading strategy, a higher time frame is used to predict the stock direction.
You have to mark the support and resistance levels in the chart before taking the trade.
I recommend large-cap trading stocks because an individual can’t manipulate the scrip, and the movement will be based on that stock’s news and financial status.
These types of trades will be more practical and most probable.
By combining these indicators with the Fibonacci trading strategy, you will get the most accurate and most probable trade.
If you are interested in taking these types of most probable trades, you may contact us to be a profitable and most probable trader.
These are the only samples for best indicators for intraday trading.
The original program will be in our private groups and our course about Fibonacci trading strategy.
For applying these Fibonacci trading strategies, the best platform is a trading view
I am not a trainer; in the stock market, there are no trainers; all are learners.
There are many best indicators for intraday trading will personally recommend that will be available in our private channel.
Leave a Reply