Transform your Trading
Transform your Trading
Using the Fibonacci Grid for Forex Trading
Traders are always looking for an edge, an edge that will make the difference between profits or a loss. Traders need trends to make money. The trend may just last two or three minutes for intra-day trades or go on for months on end for longer term traders.
This article outlines how to use a Fibonacci Grid to time trade entries to ensure the optimum entry level to maximise profits when trading trends.
Firstly, let me outline the wrong way to trade. There are a good many trading books that have a simple buy and sell strategy, it's this: Buy new highs and sell new lows. Now the problem with this is that the major part of the move has been completed before it gets to the old high or low, before it can break through it to create a new high or low. Also, reversals are most likely to take place in the region of old highs and lows! So either, get in much earlier or wait until a pull back after the new high or low.
The failure rate of buying new highs and selling new lows is very high, that is, the odds are not in favour of a continuation. Also, market manipulators (more on this in another article) like to push prices through to new highs or lows and then promptly run the price back in the opposite direction.
So here is the technique to correctly trade trends using the Fibonacci Grid. Firstly find an established trend. A trend is defined by a sequence of higher highs and higher lows for an uptrend. Once a new high has been formed do nothing wait for the inevitable correction or pull back.
Place the Fibonacci Grid between the last higher low and the current high, as price retreats wait for it to turn back up at one of the key Fibonacci retracement lines and then buy in for a low risk high probability trade.
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