Forex Trading Strategy with Fibonacci Retracement

21 January 2016, 16:39
Abdul Salam
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Forex Trading Strategy with Fibonacci Retracement

We will present a forex trading strategy for intraday movements, which is extremely simple and easy to implement. It is essentially a forex trading technique. You can apply this technique to any currency pair.

If you follow strictly the rules, you will earn sufficient number of pips.

Timeframe


From 5 minutes up to 4 hour chart.

This forex trading strategy contains the following indicator :


SMA(5) – Simple Moving Average

Search on the chart for a price movement. Find the most recent swing high and the most recent swing low -  these are the Fibonacci A swing and B swing.

Use the Fibonacci retracements tool from A to B.
Wait and watch the retracement from A to B swing to unfold.

During the retracement there are three conditions to be met in order to consider trading:

  • The price must touch the SMA(5).
  • The price must at least touch 0.382 Fibonacci retracement level.
  • The 0.618 Fibonacci retracement level must not fail. 
Here it means the price should not close below (uptrend) or above (downtrend) 0.618 retracement line. It can touch or poke it, but the level must withstand the pressure.
 

Buy Rules


When all three criteria are met, enter once the candle is clearly closed above SMA(5).
 

Sell Rules


When all three criteria are met, enter once the candle is clearly closed below SMA(5).
 

Stop Loss


Place the stop loss always 4-5 pips above (downtrend) or below (uptrend) the 0.618 Fibonacci
retracement level. 

Take Profit


Place the take profit 1.618 Fibonacci expansion levels above or below point A.

Important : All investors should know that any forex trading strategy before implementing in a real account needs to be tested in a demo account in order to be fully understood.

Also, all traders should be aware that extraordinary events occurring in the forex market very often, and is likely to alter the financial results of a forex trading strategy.
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