I have been experimenting with fib extension levels, as opposed to the fib retracement levels for my entries.
Of course all trades need to be combined with higher time frame analysis, which will be shown below. However, I have found that the 127.2 number and especially the 161.8 extension number to be a great place for a trade entry, if you are certain about the Fibonacci range and retracement level; which can be quite easy to find once the move has happened. This is a nice system of taking trades I believe, because occasionally one may misinterpret the actual retracment level, and enter at the incorrect price, as one may have drawn their fib level incorrectly, relative to other traders; whereas trading the extension allows one more time to analyze, as well as the gift of hindsight. Furthermore, if we are aware that traders take profit at these extension levels, then would one not want believe that this area is significant? and would one then not consider entering a trade at this point? since so many traders are exiting, the volatility is high, and usually your risk to reward ratios are very high as well. This is a trade I took earlier today, I have exited half my position, the remainder I am going to let run, but this trade allowed me a great reward to risk ratio, whereby i risked 4 pips, in order to make 40 (which is target 1). ie; a 1/10 reward to risk ratio.
But please do take into account that i used this method for my entry, after having done my higher frame analysis.

This is just something I have been experimenting with, and im sure many other traders are aware of it; nonetheless, if you were not aware of it, it is great food for thought 🙂

USD/CAD daily chart

as we can see, price is coming off major support (shown in red), so I had the intention of buying beforehand.

USD/CAD H4 chart

Again, I have solid diagonal support on the 4hour frame in this instance, adding additional substance to my bullish bias. shown by black trend line.

USD/CAD M5 chart

This is the 5 minute chart, where I usually take my entries. I have labelled each leg as abc and d. they all coincide with fib retracment and extension numbers shown on the chart. the 161.8 number is d, in this instance, my entry level, and in many instances where traders are taking profit. my initial target was up at point a, where i have scaled out, and am now going to let the rest of position run with entry at break even.

7 thoughts on “Alternative use of Fib numbers; USD/CAD long 17th may”

  1. Pedro says:

    Awesome post Dom!!!

  2. Teboho Faro says:

    This is great. I actually have been using 127.2 since my elliot wave days

  3. Maryna says:

    Dom, there is a great and accurate automated Fib tool available for MT4. I’ve been using it for a few of my trades posted as the majority of traders use some sort of indicator and don’t always understand my trades as I use “clear” charts.

    1. Dominic Davimes says:

      Hey Maryna; I’m sure there are some awesome fib tools available, I like to draw my fib levels personally, so as to ensure I get the correct range, whereby price respects as many of these levels as possible, which will increase the accuracy of my trade entry.
      I have also been using MT5, because you can ray the trend lines both right and left, and it actually provides a much greater deal of accuracy when understanding price movements, as well as when looking for entries and exits.
      I really do recommend checking it out; but yes I have also recently switched to blank charts, and have found my performance to much better, as well as having a much greater degree of clarity 🙂

      1. Maryna says:

        Great stuff Dominic and happy trading!

        1. Dominic Davimes says:

          and to you 🙂

  4. Ryan Gandalf van Jaarsveld says:

    I dig it – I especially like the play on the profit taking at the extension… Like a sniper!!

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