Fibonacci In Trend Trading

In life, the more we try to avoid financial suffering or any kind of suffering,
the more we suffer because what we think is mysterious many times is
nothing more than simple knowledge that needs to be understood. You need
to learn to become financially empowered instead of financially vulnerable.
Nothing I teach is to be feared, only understood. Have the courage to become
empowered in Forex, only then will you be successful in trading Forex.

STEPS TO BE FOLLOWED WHEN TRADING AN UPTREND
1. Draw all uptrend lines and downtrend lines, inner, outer, and
long-term. (This will help to determine if the market is in an
uptrend, downtrend, or if a trend line has been broken, signifying
the potential end of a trend or a reversal.)
2. Find the latest upward A, B and use the Fibonacci tool on your
trading software to draw the Fibonacci retracement and extension lines.
3. Find a C buy-entry at a convergence, such as a Fibonacci
retracement level, upward trend line, morning star, tweezer bottom,
or bullish engulfing candle.
4. Find the projected Fibonacci D extension, as well as four levels of
past resistance. Find the closest level of resistance to the Fibonacci
extension. Place a limit exit order 10 pips in front of, or before it
hits, either the Fibonacci extension or the level of resistance
(remember when the bulls score a point it always pulls back).
5. Look at your potential financial risk with your protective stop-loss
order. If you can’t afford the potential loss should the trade not work
out, then stay out and do not trade!
6. Pull out your trader’s checklist that you have created or the one
supplied by Market Traders Institute. Create a trading plan and
trade your plan.

STEPS TO BE FOLLOWED WHEN TRADING A DOWNTREND
1. Draw all uptrend lines and downtrend lines, inner, outer, and longterm.
(This will help to determine if the market is in an uptrend,
downtrend, or if a trend line has been broken, signifying the
potential end of a trend or a reversal.)
2. Find the latest downward A, B. Use the Fibonacci tool on your trading
software to draw the Fibonacci retracement and extension lines.

3. Find a C sell-entry at a convergence, such as a Fibonacci retracement
level, downward trend line, evening star, tweezer top, or
bearish engulfing candle.
4. Find the projected Fibonacci D extension, as well as four levels of
past support. Find the closest level of support to the Fibonacci
extension. Place a limit exit order 10 pips in front of, or before it
hits, either the Fibonacci extension or level of support (remember
when the bears score a point it always pulls back).
5. Look at your potential financial risk with your protective stop-loss
order. If you can’t afford the potential loss should the trade not work
out, then stay out and do not trade!
6. Pull out your trader’s checklist that you have created or the one supplied
by Market Traders Institute. Create a trading plan and trade
your plan.

Fibonacci numbers are really significant and play a big part in our
lives. Learning the Fibonacci numerical sequence and trading ratios adds a
very important tool to your trader’s toolbox.

Many traders fail because they are too busy trying to tell the market
what to do. Do not try to tell the market what to do—that is like telling the
rapids to step aside because you want to leisurely swim upstream. It is not
going to happen. Learn how to read the markets. Let it tell you what it is
going to do and then go with it.

There is a reality as you trade, and you need to accept the fact that you
cannot make money 100 percent of the time in the market, even with the
knowledge of the Fibonaccis. But you can execute your trades 100 percent
of the time using productive trading rules and become a winning trader,
even by only winning 50 percent of the time, provided you maintain the
right equity management.
Read More : Fibonacci In Trend Trading

The Value Of Adding The Fibonacci Numbers To Our Trading Systems

Let’s put everything you have learned so far together to increase your
percentage of finding a winning trade. The natural law of the Fibonacci
numerical sequence is not capricious, it works on every time frame and in
every market. It is just as valid in the Forex as it is in the stock or
commodity markets. As a matter of fact, anywhere you can pull up a
financial chart, on any time frame, you will see the Fibonaccis in action.

I will never forget one class I taught in Sydney, Australia, when I met an
older gentleman, named John, who introduced himself to the class by stating:
“I have come to take your course because three years ago, I bought $250,000
worth of Qantas stock at $2.00 a share. I told myself when it hits $5.00 a share,
I’m selling.” He proceeded, saying, “That #@*#@* stock went to $4.90 cents

a share, looked at all my sell orders, laughed in my face, then U-turned and is
now back around $2.00 a share. I came here to figure out what happened and
why I was so greedy and didn’t sell at $4.90 a share. That was my retirement
money.” This reminded me of a saying my dear friend and mentor Fred
Gronbacher taught me, it goes something like this: “The ignorant must suffer.”
I told John, and the class, “After I teach you how the markets work, on
the last day of the class, we will pull up a chart and look at Qantas stock.

Mark my words, and write this down right now.” Everyone grabbed a piece
of paper and started writing. “On Saturday, when we pull up the chart, at
$4.90 there will be a bearish candlestick formation at a D Fibonacci extension
level followed by an uptrend line break, the reversal will create a
bearish ‘king’s crown,’ and the market will begin to make down A, B, C, D
all the way down to $2.00 a share.” I would have showed all of them at that
moment what I was talking about, but it would have been of no value until
they finished the course.

After class on the third day, we pulled up a Qantas chart and, sure
enough, right before everyone’s eyes was one of the most beautiful evening
stars at a D Fibonacci extension level. This was followed by an uptrendline
break, a bearish king’s crown, and down A, B, C, D’s. John jumped up out
of his seat as he was sitting on the first row and, in front of 45 people,
grabbed me, gave me a bear hug, and kissed me on my cheek. The class
began to laugh, but as John pulled away, he looked at me with a tear in his
eye, whispering “Thank you, chief!”

It has been from countless moments like these, shared by great people
like John, that I have found my true destiny in life. I have learned we make
a living by what we get, but we make a life by what we give.

CONCLUSION
Knowing where to get into the market and where to get out, and why, is
about as close to the holy grail that you’ll ever get. Understanding that
nature exists in the market, and how it works, places the trader at a huge
advantage. It allows a trader to wait for the retracement bounce at a preprojected
retracement number, having the market move in their direction
from entry, which is every trader’s dream, then riding it to the preprojected
corresponding Fibonacci extension.

As you read the step-by-step rules of trading a trend, try to envision the
movement of the market and the trading process. This methodology works
on all time frames and in all markets.
Read More : The Value Of Adding The Fibonacci Numbers To Our Trading Systems

The Fibonacci Secret

This article is extremely dear to my heart because knowledge
of the Fibonaccis saved my financial life. You have no
idea how many times I wanted to throw in the towel because I
couldn’t figure out how the market works. Every new trader
has dreams, and those dreams can quickly turn into nightmares
when you don’t know what you are doing, which is why I am so adamant
about finding a mentor. I didn’t have a mentor, and my dreams quickly
turned into nightmares.

The name Leonardo Fibonacci was airmailed to me straight from
heaven. The understanding of his discoveries changed not only my trading

career but also my life. What he discovered between the late 1100s and
early 1200s explains how nature takes its course and proves that we are
created in a numerical sequence, just like pinecones and pineapples. His
discoveries also prove that the market is not this mysterious chaotic place
that most people fear. It is a place where organized chaos exists, a dynamic
system that is extremely sensitive to the human condition—the ebb and
flow, the yin and yang, the action and reaction, the ups and downs of life.
The Fibonacci Numerical Sequence is the ultimate display in the market of
matter and energy and their interactions with each other.

When I heard about the Fibonacci numbers, back in the early 1990s, no
one seemed to know anything about them. So I called my trading data
provider, figuring that if anyone would know about the Fibonacci numerical
sequence and how to trade it, they would. After all, they provide market
data to more than 200,000 traders worldwide. To my surprise, the customer
service representative had never heard of Fibonacci and suggested I talk to
their programmer. Fortunately, he had heard of the Fibonacci retracement
levels and asked if I wanted them programmed into the software. I was like
a kid in a candy store getting free candy screaming, “Yes!”

As life goes, if it sounds too good to be true, it usually is. The next day,
the programmer called telling me the Fibonacci retracement numbers were
installed into the software. I told him, “Thanks a lot. Now can you show me
how to use them in a trade?”
He was quick to respond, “No, I am just a programmer, not a trader.”
I felt like I was ready to throw up from eating too much “false hope”
candy from the candy store. I once again sat in disbelief that I was no better
off today than yesterday and back at square one.

Things turn out best for those people who make the best of how things
turn out. I figured that once I had the Fibonacci levels installed, I just needed
to learn how to trade them. It looked like it was going to take a bit more
effort than I initially anticipated.

So I started asking everyone I knew about the Fibonaccis again. A
friend of mine told me about a new book by Larry Pesavento, Fibonacci
Numbers with Pattern Recognition, which I raced out to buy.
As time went on, I established a cordial working relationship with
Larry and soon recognized some fundamental differences in how the
Fibonaccis should be traded in the market.

You can always tell who is the more experienced in any conversation.
After everything is said and done, the wiser will always take the positions
that they would rather be happy than right. So as we engaged in healthy

discussion on how the Fibonaccis should be traded, Larry would always
say, “Jared, if that way works for you, then I am happy for you and you need
to keep doing that.”

Learning how to trade the Fibonacci retracement and extension numbers
like I do today started to make my life wonderful and successful. It
became the main life preserver in my trading career as I moved forward.

THE HISTORY OF FIBONACCI
Leonardo de Pisa de Fibonacci, was born in 1170 in Italy and educated in
North Africa, where his father, Guilielmo, held a diplomatic post. His
father’s job was to represent the merchants of the Republic of Pisa who
were trading in Bugia, now called Bejaia (Bejaia is a Mediterranean port in
northeastern Algeria), and Leonardo traveled with him, learning about
math during his father’s stay there. Little by little, he began to recognize the
enormous advantages of the mathematical systems of the countries they
were visiting versus the Roman numerals he had been taught.

One of the mathematical concepts that intrigued Fibonacci was the
nine-digit system (1,2,3,4,5,6,7,8,9) used by the Indians.
Fibonacci’s travels ended around 1200, and he returned to his hometown
of Pisa. It was there that he started to work with the royal families,
introducing the numbers 0 through 9 (a 10-digit system). It was
there that he also wrote many of his texts, including Liber Abaci in 1202,
Practica Geometriae in 1220, Flos in 1225, and Liber quadratorum in
1225. Producing a book during this time was a major task, given there were
no typewriters or computers and everything had to be handwritten. For this
reason, human civilization has unfortunately lost some of his works on
arithmetic, such as Di minor guisa and his commentary on Euclid’s
elements. It is interesting to note that after Leonardo introduced 0, 1, 2, 3,
4, 5, 6, 7, 8, 9 to the Roman mathematical scholars, they debated for more
than 300 years whether or not the number 0 was of any value.

Back in the 13th century, Europe predominately used Roman numerals
for all its mathematical calculations. The problem is that it is virtually
impossible to add, subtract, multiply, and divide using Roman numerals.
And for that reason, historians could not quantify the wealth of a person.
Think about it. How wealthy was King Solomon or King Harrod in Biblical
times? No one knows. No one was able to quantify their wealth using
Roman numerals. All we know today, via the Bible, is that they had more

money than they needed or could spend. Today we can easily quantify a
person’s or company’s wealth, so we know that Bill Gates is currently worth
an estimated $56 billion, down quite a bit from $96 billion prior to
September 11, 2001.

For those not familiar with Roman numerals, they are I = 1, V = 5, X = 10,
L = 50, C = 100, D = 500, and M = 1,000. Fibonacci’s claim to fame was the
introduction of the numerical arithmetic system we know today: 0, 1, 2, 3, 4,
5, 6, 7, 8, 9. One of the most important books Fibonacci wrote was Liber
Abaci, which means “The Book of Calculations” when translated. It was only
after he wrote this book that the Roman numeral system was replaced by the
Indians’ nine digits and the Arabic zaphirum (“zero”).
Read More : The Fibonacci Secret