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Forex Retracement Strategy, Fibonacci Retracements, Pull-Back Trading Strategy

Discussion in 'Trading Strategies by SHIGERU (FX/TRADING MASTER)' started by SHIGERU, May 7, 2016.

  1. SHIGERU

    SHIGERU FX / TRADING MASTER Staff Member

    Difficulty Level: 6/10
    Time to read/learn: 15-20 minutes
    Profit %: 75-85%

    Hi friends, today i want to talk about one of my favorite strategies. It's known commonly as retracement, some other trades like to call it Pull-Back Trading, Fibonacci Retracement or buying at value... but no matter who calls it - I always use it for my daily trades.

    Retracements are short-term opposite movements in a bullish or bearish trend.

    They can happen as small or big dips and are seen with every major currency, stock or commodity. They are a natural behavior of the markets and it allows traders to enter the market at much better prices.

    Just remember that no chart goes up or down in a straight line - they move up and down, like waves on a beach.

    This is because there are traders who are getting out of the markets by closing their positions, causing opposite movements in a trend.

    Here are some basics of a retracement explained simply.

    bullish-fib-retracement-1.jpg

    Bullish retracements come in all sorts of different shapes and styles. Some are sharp retracements, some are shallow.

    bullish-fib-retracement-2.jpg

    One of the more common retracements are the 50% Fibonacci retracements. Price goes back to 50% of the previous move, before heading back up. Many traders often use this level to get back into a bullish trend.

    bullish-fib-retracement-3.jpg

    Another favorite is the 61.8 level. Some trades enter a trade either at the 61.8 or the 62 level.

    bullish-fib-retracement-4.jpg

    Another favorite is the 75% level. Many traders LOVE this level because it often represents the best ideal area to enter a trade, or to enter a scalp (a short term trade). This level is often very respected, and price often bounces OR reacts to this level.

    bullish-fib-retracement-5.jpg

    Here's are some examples of how to measure a Bullish Retracement.

    It will take you some time to practice and get used to it, but you will get it!

    Using Fibonacci Retraacement tool in Metatrader is easy and straight forward. Just look for this option!

    bullish-fib-retracement-tool.jpg

    Use the Fibonacci Retracement tool, to measure the most recent low, to the most recent high points.

    bullish-fib-real-life-example.jpg

    In a trend, there are often Minor and Major Retracements! It's very important to identify when you're in a major retracement.

    Often a trend can continue to keep moving in one direction! Remember, what can go higher... CAN GO EVEN HIGHER!

    A major retracement is often mistaken by new traders as a sign of a reversal!

    bullish-fib-retracement-7.jpg

    Here is a great example of minor retracements followed by MAJOR retracement!

    bullish-fib-retracement-8.jpg

    Bearish Retracements

    A bearish retracement is the same as a bullish retracement, it's just reversed :)

    bearish-fib-retracement-1.jpg

    It aalso comes in all forms of different shapes and sizes.

    bearish-fib-retracement-2.jpg

    The most common level for traders to enter a trade is the 50% retracement area.

    bearish-fib-retracement-3.jpg

    The 61.8 Fibonacci level is also a top favorite of many traders to enter in a trade. We often recommend traders going short at this level when a bearish trend is clear.

    bearish-fib-retracement-4.jpg

    The 75% level, like the Bullish retracement, is a very strong level to enter a trade with the trend.

    It often is also a very ideal scalping level for traders to make profits as price often respects and reacts to this fibonacci level.

    bearish-fib-retracement-5.jpg

    As with every trend, there are Minor as well as Major retracements.

    A chart pattern that occurs once on the daily chart, may occur multiple times on the hourly chart.
    bearish-fib-retracement-7.jpg

    Can you see the minor and major retracements that happen in a bearish market?

    bearish-major-minor-example.jpg

    Drawing the Fibonacci tool to measure retracement levels is VERY important. You must follow the proper way of measuring your levels!

    bearish-fib-retracement-tool-bearish.jpg

    Change your default Fibonacci Retracement Settings to our Recommended Settings

    We recommend you to change your Fibonacci Settings to the following settings as we don't view the 23.6 and 38.2 Retracement Settings as being very "strong" when it comes to actual trading. On the other hand, we find that price often reacts strongly at the 75 retracement level, so we recommend you include that in.

    These are just our recommendations - you can still trade with the default values, but in our onefxx settings, we focus only on the most "strongest" retracement levels of 50, 61.8 and 75.

    Instructions below on how to update your Fibonacci settings.
    fib-change1.jpg

    fib-change2.jpg


    PS: If you would like to see the "Price" on the Fibonacci Retracement settings, you can include the variable (%$) in the description. This will tell MetaTrader to display the price on your tool.


    How to Draw and Trade Fibonacci Retracement Levels in a Bullish Trend

    fib-example-1.jpg

    fib-example-2.jpg

    Once you've marked out your Fibonacci Retracement Levels, it's time to look for additional factors for you to BUY and continue onto the trend.

    In the example below we show a few factors!

    fib-example-3.jpg

    It's crucial you have 2 or more technical factors (In this case above, we have 4 factors to) to buy in, as this allows you a better percentage of the price chart moving in your favor.

    How to Draw and Trade Fibonacci Retracement Levels in a Bearish Trend


    fibsell1.jpg

    fibsell2.jpg

    Once you've marked out your Fibonacci Retracement Levels, it's time to look for additional factors for you to SELL and continue onto the trend.

    In the example below we show a few factors!

    fibsell3.jpg

    It's crucial you have 2 or more technical factors (In this case above, we have 3 factors to) to sell and continue the trend, as this allows you a better percentage of the price chart moving in your favor.

    Try and see this for yourself...


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    Last edited: Apr 23, 2017
    Humble likes this.

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