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Fibonacci Retracement Channel Trading Strategy

The document describes a 5-step Fibonacci channel trading strategy. The steps are: 1) Find a strong trend reversal, 2) Wait for price to move in the direction of the trend, 3) Wait for further consolidation, 4) Draw Fibonacci channels on the consolidations, and 5) Enter trades when price pulls back and hits the channel lines. Profits are taken at the 100% channel line and stop losses are trailed as the trade moves in your favor.

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Junior
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455 views10 pages

Fibonacci Retracement Channel Trading Strategy

The document describes a 5-step Fibonacci channel trading strategy. The steps are: 1) Find a strong trend reversal, 2) Wait for price to move in the direction of the trend, 3) Wait for further consolidation, 4) Draw Fibonacci channels on the consolidations, and 5) Enter trades when price pulls back and hits the channel lines. Profits are taken at the 100% channel line and stop losses are trailed as the trade moves in your favor.

Uploaded by

Junior
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Fibonacci Retracement Channel Trading

Strategy
The First and ONLY tool you need is the:

Fibonacci Channel Indicator: This indicator may look different for you depending on what
Platform you are using (Tradingview, MT4, Tradestation, Ninjatrader). They all come
standard on your platform. This is similar to the Fibonacci Retracement tool, only you can
turn the FIB levels to the upside or to the downside.

Like this:

Step #1 Find a Strong Down Trend/ Uptrend that is Forming

This step is critical to get right. You need to find a strong current uptrend at this point. More
often than not you will see this occur on a trend reversal. Not all the time, but a good portion
of it. Take a look:
We saw here a nice uptrend before it broke the line of support and headed to the downside. At this
point you need to continue to wait if the price will "bounce" off of a certain level and head back to
the upside.

Which Brings You to Step #2 of this forex Fibonacci strategy In a Down Trend, wait for
price action to consolidate and head back to the upside.

Here is what it looks like:


Again, there is nothing here we are interested in trading. The price action needs to head back
to the upside, consolidate, then we are ready for business for a sell entry.

Step #3 of the Fibonacci channel strategy: Wait for Price action to "Hit a Ceiling" or in
other words Consolidate Again.

Here is what this step will look like:

You can see in the chart above that I labeled each step of the Fibonacci channel trading
strategy. Each step is colored. So at this point here is what has happened. Price action broke a
main up trend and then cause a long bearish trend (Step #1) Then, after consolidation, the
price action went back to the upside (step #2) This uptrend continued for quite a while before
finally consolidating again (step #3)
Step #4: Apply Fibonacci Channel Indicator

I will walk you through where to place this. You already did most of the work aleardy
following Step 1-3 so this step should be very simple.

Place the Fibonacci Channel Indicator on the consolidation #1 and Consolidation #2 in the
direction of the channel.

Like this:

Once you do this, congrats! It's now time to search for a trade....

After it shows you one more thing to confirm that this is indeed a channel

Step #5: Wait for Price action to push down and pull back. (Make Entry after Pull Back)

Here is what This looks like:


Great! Do you see that on the pull back it hit our channel line? That is exaclty what you want
to see!

Here are all the steps so far:

Take a minute and study this picture above. There is a lot to digest there!

This is the main five steps it takes to make a SELL entry based off of this strategy. Simply
follow each step by their color and you got your first entry!

SELL Entry #1 and Entry #2

So you already know where to enter the first trade.


Right here:

Now.. You want to press you winners with this strategy so when the price action hits the 50%
mark of the Fibonacci Channel indicator you make a second entry!
Now.. You want to press you winners with this strategy so when the price action hits the 50%
mark of the Fibonacci Channel indicator you make a second entry!

TAKE PROFIT/STOP LOSS

When the price action hits the 100% Fibonacci channel line you drew you will close both
trades immediately, no exception!

This is the other support level. When the price hits this level there any many things that could
happen (Mostly bad)

You see a lot of buyers know this level, so they have BUY entry orders sitting at the 100%
line of that channel. Once price action hits that level it's going to trigger all of those buy
entries (along with many sellers getting out) and this is whats going to happen most likely:
It's simply traders making trading decisions!

You want to use a trailing stop loss. So as the price moves down you will be moving you stop
loss accordingly. There are advantages and disadvantages to using a trailing stop. Our team
tested a few different methods with this strategy and agreed that a trailing stop loss is the way
to go with the Fibonacci Channel Trading Strategy.

Here is what I would look like during the trade.


Once the Price actions touches the 50% Fib line and we added a second entry, go ahead and
move your stop loss to your first entry at the 38% Fib Line. This will lock in some profit in
case the price action decides to turn on you and head to the upside!

Once the Price action touches the the 78% Fib line move both stop losses to the 50%
fibonacci line. This will lock in profit for the first trade and you will break even on the second
trade! You still win either way

Take a look:
Below is a BUY trade example using the Fibonacci Channel Strategy:

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