Brief Summary
This video provides a comprehensive masterclass on Fibonacci trading, covering its presence in nature and financial markets, the mechanics of Fibonacci tools, retracement and extension techniques, key Fibonacci zones, advanced settings, and practical trading strategies. It emphasizes understanding market structure, identifying swing highs and lows, and using Fibonacci tools to find entry and target levels.
- Fibonacci pattern exists in nature and financial markets.
- Fibonacci retracement helps identify entry points, while extensions help find price targets.
- Key Fibonacci levels include the Golden Zone (0.5 - 0.618) and 0.382 - 0.5 (for strong trends).
Fibonacci Trading Masterclass: Course Overview
The video introduces a comprehensive Fibonacci trading course designed for traders of all markets. The course will cover the definition of Fibonacci, its presence in nature, the mechanics of the Fibonacci tool, Fibonacci retracement for identifying buy signals, and Fibonacci extension for determining price targets. Additionally, the course will cover the golden zone, golden pocket, and the 0.382 to 0.5 range, along with advanced Fibonacci settings and trading strategies.
The Fibonacci Pattern is Found EVERYWHERE
The Fibonacci pattern is a sequence of numbers found pervasively in nature and introduced to the Western world by Leonardo Fibonacci. The sequence starts with 1 and 1, with each subsequent number being the sum of the two preceding ones (e.g., 1, 1, 2, 3, 5, 8, 13, 21). This pattern is observed in natural phenomena such as shells, galaxies, hurricanes, and plants, as well as in financial charts.
What is Fibonacci in Trading?
In trading, Fibonacci refers to Fibonacci ratios that are present in all financial markets, including crypto and Forex. Key ratios include 0.618 and 0.382, which are derived from the Fibonacci sequence. The 0.618 ratio is calculated by dividing a Fibonacci number by its subsequent number, while 0.382 is obtained by dividing a Fibonacci number by the number two steps higher in the sequence. These ratios can act as potential reversal points in price movements.
How the Fibonacci Tool Works
The Fibonacci tool, demonstrated using TradingView, involves selecting the FIB retracement tool and dragging it across a chart to create levels and zones. These levels are percentages of the distance between the two points selected. For example, 0.236 represents 23.6% of the move, and 0.382 represents 38.2%. The 0.5 level represents 50% and is based on simple geometry rather than the Fibonacci sequence.
Fibonacci Retracement
Fibonacci retracement is used to predict how far the price will retrace against the trend before continuing in its original direction. Understanding swing highs and swing lows is crucial for identifying trends and retracements. A retracement is a move in the opposite direction of the trend, and the Fibonacci retracement tool helps find areas where the price is likely to reverse and continue the trend.
How to Draw Fibonacci CORRECTLY
To draw Fibonacci retracements correctly in an uptrend, identify a swing low and a swing high. There are two methods: either start from the lowest wick of the swing low to the highest wick of the swing high, or from the lowest candle close of the swing low to the highest candle close of the swing high. Consistency in method is key. The tool helps identify potential areas where the price may retrace to before continuing its upward movement.
Fibonacci Extension
Fibonacci extensions are used to identify target levels, contrasting with retracements, which are used to find entry points. Identifying swing highs and lows is crucial for using Fibonacci extensions. The price often reacts at key extension levels such as 0.786, 1, and 1.618, which can be used to set profit targets.
How to Draw Fibonacci Extensions
To draw Fibonacci extensions, select the trend-based FIB extension tool and identify swing highs and lows. Drag from the swing low to the swing high, then to the swing low of the pullback. The one level represents a 100% measured move objective, a common area for traders to take profits. The numbers indicate how close the price is to the 100% measured move objective, with levels like 1.618 indicating the price has surpassed the objective by 61.8%.
The Golden Zone
The golden zone is the Fibonacci area between 0.5 and 0.618 and is considered one of the best Fibonacci levels. The 0.5 level represents 50% of the impulse move between the swing low and swing high, while the 0.618 level is derived from the Fibonacci sequence. This zone is significant because impulse moves and pullbacks often have similar lengths in many trends, causing price reversals around these levels.
Most Underrated Fibonacci Zone
The Fibonacci zone between 0.382 and 0.5 is presented as an underrated area, particularly effective in strong trends. In such trends, pullbacks often reverse within this zone, failing to reach lower than the 0.5 level. The 0.382 level is derived from the Fibonacci sequence, while 0.5 comes from basic geometry.
The Golden Pocket
The golden pocket is the Fibonacci zone between 0.618 and 0.65. Unlike the golden zone, the 0.65 level does not have a mathematical or geometrical explanation, making its use arbitrary. It's recommended to use this zone with caution, as there is no clear reason why 0.65 should be significant.
Best Fibonacci Settings
The video transitions to discussing the best Fibonacci settings, noting that different settings are useful in different situations depending on trading style and market conditions. The settings to be covered include those for the golden zone, sniper entries in strong trends, beginner-friendly settings, and settings for exact target levels.
Setting #1 - The Golden Zone
To set up the Fibonacci tool for the golden zone, select FIB retracement, drag the tool on the chart, and go to settings. Keep the 0 level checked, uncheck 0.236, 0.382, and 0.786, and uncheck all FIB extension levels. Keep 0.5 and 0.618 checked. Change the color of 0.618 to yellow or gold to highlight the golden zone.
Setting #2 - Sniper Entries (Strong Trends)
For sniper entries in strong trends, select the Fibonacci retracement tool, drag it out, and go to settings. Keep 0, 0.382, 0.5, and 1 checked, and uncheck 0.236 and all other levels. Change the color of 0.382 to match 0 and 1. This setting is effective in strong trends because pullbacks often struggle to go below the 0.5 level, with reversals occurring near the 0.382 level.
Bonus - Fibonacci in Downtrends
The video briefly demonstrates using the strong trend settings in a downtrend. Anchor the Fibonacci tool from the highest point of the swing high to the swing low. The price will often pull back to the 0.382 to 0.5 area before continuing downward.
Setting #3 - Best Settings for Beginners
For beginners, the recommended settings involve keeping 0, 0.382, and 0.618 checked, and unchecking 0.236, 0.5, 0.786, and all other levels. This creates a broad zone between 0.382 and 0.618, capturing both the golden zone and the strong trend setting. This setting provides a balance, with the price frequently reversing in this area, though signals may be less precise. Breaking below the 0.618 level can be a warning sign that the trend may be ending.
Setting #4 - Exact Targets (Extension Setting)
To find exact targets, use the trend-based FIB extension tool. Keep 0, 1, and 1.618 checked, and uncheck all other levels. The one level represents the 100% measured move objective, while 1.618 is another key target level.
Using Fibonacci Retracement & Extension Together (Trading Strategy)
The video concludes by combining Fibonacci retracement and extension to build a trading strategy using the beginner settings. Identify a swing low and swing high, then use Fibonacci retracement to find potential entry points. Wait for the price to come back to the Fibonacci zone and look for confirmation signals, such as breaking above a downward sloping channel. Set the stop-loss below the lowest point of the structure and use the trend-based FIB extension to set the target at the one level, representing the measured move objective.
