As EUR/USD channels sideways, we move our fibo fan LOW to the next dip on
00:05 low 1.2792
This provided more fibs, of which the 61.8 caught the next peak around our resistance line of 1.2827 (previous day's Asian high).
The first bounce off the fibo fan captured gross 23 pips.
This one thus far is +15 gross pips. We would plot retracement fibs fro 1.2790 to 1.2832 and trade to 38.2, 50, or 61.8 fib.
Stop-loss can be a flat number of pips, such as 10 pips. Otherwise, we would ned to plot an extension.
Edit: The market is recognizing 1.2792 as the low, so make appropriate adjustments to Point A and retracement fib pull.
Last edited by fxbaja; 08-20-2010 at 08:14 AM.
Here's an updated chart after moving our fibo fan. The bounce down hit within 1 pip from the 78.6 horizontal retracement fib of 1.2800 and bounced. The fibo fan's 50% fib also caught that low pivot.
We can see the adjusted fibo fan lines providing good support and resistance. Our retracement fibs are also being respected, as usual.
If you have a good handle on these S&R tools, it won't matter if the market is flat/channeling. You will be able to make money.
August 20th Breakout of Asian Low
Attached 5-min chart shows the 3 ABC patterns and its extension levels.
The 1st ABC (green) pertained to the breakout of the Asian Low, as reported during the action.
A = 08:05 high 1.2829
B = 08:20 low 1.2801
C = 08:30 high 1.2812 (38.2% retrace of A-B)
Asian Low = 1.2890
FE 100 = 1.2784
FE 127 = 1.2776
FE 161.8 = 1.2767 (target - hit)
Comments: Although the distance form Point B to the Asian Low was a bit high, targeting the FE 161.8 was worth the loss of pips waiting for entry after break of Asian Low - provided we select a proper stop-loss.
Distance A-B was below 45 pips, our rule targets the FE 161.8.
Entry SELL = 08:45 5-min candle open price 1.2787.
- Reward = 16 pips after spread and cushion.
- Just above Asian Low 1.2790 + cushion = 1.2791. Risk = 4 pips
- Just above FE 61.8 of 1.2795 + cushion = 1.2796. Risk = 9 pips
- Just above Point B 1.2801 + cushion = 1.2802. Risk = 15 pips
- Just above 23.6 retrace fib of A-B 1.2808 + cushion = 1.2809. Risk = 22 pips
- Just above Point C 1.2812 + cushion = 1.2813. Risk = 26 pips.
Breakout was clean, only retracting to 1.2794. As it decended, we didn't even have time to move our stop-loss to just above the FE 100, before the profit target was reached.
Extension went on to nailed the FE 236.2 fib price of 1.2746 and bounced.
2nd ABC (blue):
A = 08:30 high 1.2812
B = 09:10 low 1.2745
C = 09:35 high 1.2767
FE 100 = 1.2700
FE 127 = 1.2682 (hit)
FE 161.8 1.2659
3rd ABC (black):
A = 09:35 high 1.2767
B = 10:30 low 1.2684
C = 12:10 high 1.2718
FE 61.8 = 1.2667 (hit)
We can see the drop in pair respect each ABC extension. It halted short of the 2nd ABC's FE 161.8 because it had hit the 3rd ABC's FE 61.8.
These moves always recalculates. It also can respect multiple ABCs.
An intermediate/advanced trader can elect to stay in the trade in anticipation of further gains. Tools that can assist include the forex freedom bars, the Heiken Ashi Smoothed (HAS) candles, and the QQE.
If the QQE was utilized on the 5-min chart for exit, we wait until the opposite crossover and candle close. This would have given an exit price of 1.2702 + spread = 1.2704/05.
On the 5-min chart, waiting for an opposite colored HAS candle to close would have only secured exit price of 1.2760 + spread.
On the 15-min chart, waiting for an opposite colored HAS candle to close would have only secured exit price of 1.2711 + spread.
Those are tools that are not fib related. A fib trader would look at the 2nd and/or 3rd ABCs and follow their action. He would see that 1.2767 acted as resistance as the 2nd ABC pivoted to form Point C.
The 3rd ABC retrace 38.2% to form its Point C. Volume is weakening as Europe is set to wind down. If he decided to take it out to near Europe's close, he would see the 3rd ABC's FE 61.8 and likely take profit there.
All of these scenarios would include the trader's option to take a majority of profit at the 1st ABC's FE 161.8. This would lock in profit and "trending the balance" is at no risk to original capital outlay.
Edit: One further note pertains to the breakout. After it pivoted back up slightly to 1.2894, we can re-plot ABC. Adjusting the Points B and C would bring the FE 161.8 target to 1.2723, which it hit of course. That price area is shared by the 2nd ABC's FE 61.8 price of 1.2726.
Have a good weekend.
Last edited by fxbaja; 08-20-2010 at 06:28 PM.
Aug 20th Fibo Fan Euro Session
Here is the same chart as the last post, with the fibo fan. We can see the high/peaks that the various fib lines caught.
High = 07:25 high 1.2832
Low = 09:10 low 1.2745
1) The placement of the high: we also had the option of the 07:05 high of the same price. We always take the most recent candle if he price is equal.
After positioning the low, per above, the fibo fan's 38.2% caught the retrace of the 2nd ABC, forming Point C.
2) As the extension arrived and pivoted, we move the low to:
10:30 low 1.2684
The 50% caught the Point C of the 3rd ABC, as well as subsequent high/lows.
Fibonnaci Arc Tool
Attached is EUR/USD 1-Hour chart.
High = Aug 6th 14:00 high 1.3333
Low = June 29th 14:00 low 1.2151
1) Use fib retracement tool and pull from Low to High.
2) With fib arc tool.
- First draw a horizontal line on the Low.
- Pull the fib arc tool from the low horizontal line to the high in a straight vertical line up, aligned with high point.
- Make sure the fib arc retrace levels align with the retracement fib tool levels.
This allows us to see the price adhere to the curvatures of the fib arcs.
Zoom in for more precise alignment of the center line from high to low. The center line of that pull should also be the flat part of the arc, which should be identical to our other fib retracement lines.
We also have 1-Hour charts with a before and after pic of a Gann Fan breakout, with an ABC incorporated. Will post ABC points later as it looks to be bearish today during Asia and European sessions.
Last edited by fxbaja; 08-23-2010 at 02:52 AM. Reason: Pull fib arc from low to high in vertical line aligned with high point.
AUg 23rd Breakout of Asian Low
After a tight range through Asia, and wading past German and Euro Zone PMI, pair broke below the Asian Low of 1.2681 on 14:45.
Breakout candle was large/fast. Dip also seemed contrary to European data released at 14:00 (improved EU Consumer Confidence). One commentary was that EUR/USD is following the sagging U.S. stocks. Alternatively, we understand there was U.S. testimony scheduled for 14:30 (but rated as low-impact).
We'll leave speculation to fundamental traders.
A = 14:05 high 1.2714
B = 14:25 low 1.2675
C = 14:35 high 1.2690 (38.2% retrace of A-B)
Asian Low = 1.2681
FE 100 = 1.2650
FE 127 = 1.2639
FE 161.8 = 1.2626 (target)
Extension bounced off FE 100 to FE 61.8 as approaching Europe closing at this moment.
Entry SELL: 14:50 5-min candle opening price 1.2656. Reward potential = 26 pips after spread and cushion.
- Just above Asian Low 1.2681 + spread and cushion = 1.2684. Risk = 28 pips
- Just above Point B 1.2675 + spread and cushion = 1.2679. Risk = 23 pips
Due to fast breakout and loss of those pips, we could not place the stop-loss just above Point C, which was our preference.
Alternatively, some traders will have a worst-tolerance price to keep risk/reward to 1:1, and execute order prior to close of breakout candle. Edit: ...in order to place stop-loss just above Point C.
Last edited by fxbaja; 08-23-2010 at 04:01 PM.
When adhering to our rule to move our stop-loss just behind the FE 100, after market closes a 5-min candle past that price, we would have a new stop-loss of 1.2655.
Obviously we would stop-out, and if the textbook entry price of 1.2656 was used, this trade was a +1 pip win.
The 15/15 pip strategy was a winner, as the pullback was only 10 pips back above the Asian Low (plus spread).
In hindsight, the market was working off an ABC only visible on the 1-min chart. It was too difficult to see, but i want to point it out.
See if you can pinpoint the ABC swings on the 1-min.
Point B must be the closest pivot to the Asian low, and it must be above the Asian Low.
Point C must be a Fibonacci ratio retracement of A-B.
Once plotted correctly, the ABC's FE 100 = 1.2647. This is where the extension halted.
I'll try to remember to post the answers in the next day or two.
EUR/USD finally did hit extension FE 161.8 price of 1.2627. Unless stop-loss was at least 3 pips above Asian High, would have stop-out. Our rules require moving S/L just behind FE 100.
Need to analyze next support level. Attached is 5-min chart. We plot the ABC:
A = 19:00 high 1.2683
B = 01:45 low 1.2619
C = 03:30 high 1.2644 (38.2% retrace of A-B)
FE 61.8 = 1.2604
This price corresponds with our larger interval chart analyzes per 2nd chart. It is the 61.8% retrace fib of A-B June 29th low and Aug 8th high.
Traders that identify this kind of support can make a bounce trade, or also have a short from the 38.2% fib.
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