This Fibonacci entrance strategy has revolutionized my trading and I am sharing a case study example from recent trading on the USDJPY.

This trade occurred in the Asian Session on March 3rd, 2016. The New York session had sent price in a strong bearish direction down to established support and as the Asian Session was opening the criteria for this strategy played out in text book fashion. I detail the strategy components here as a case study guide and reference for the Forex.Today community.

Criteria for this Bullish Fibonacci Entrance Strategy

#1  New Higher High

  • After an established bearish move, generally at the start of a new session, a break above a previous high forming a New Higher High is the first element of this entrance strategy.

#2 Fib the New Higher High (Establish Your Trigger Buy Zone)

  • Once you get the New Higher High, draw a Fibonacci Study from the most recent low to the New Higher High. The 38.2, 50 and 61.8 Fibonacci Retracement Levels are generated as entrance targets.
  • The 61.8% Retracement Level is the most powerful for me and establishes part of my Trigger Buy Zone.
  • The second element used to establish my Trigger Buy Zone is the price level of the Previous High Resistance Level that was broken when the New Higher High was formed. Price will most often pullback to this Previous High and test this previous resistance level as new support in a Resistance now becoming Support Role Reversal.
  • You can see in the attached image that the establish previous high price level aligns with the 50% Fibonacci Retracement and is in proximity of the 61.8. My Buy Zone is here at this Previous High and these mentioned Fib Retracement Targets.
  • In the attached image you will see I reference this Buy Zone as “61.8 PULLBACK HL TRIGGER”. The HL in this description denotes the Higher Low established in this newly forming trend. The Higher High was established and now we have the establishment of the Higher Low, which offers a value oriented BUY ZONE, with stops in proximity of this range. This Higher Low must hold for the new bullish trend to properly form, so with your stops below the most recently established lows your risk / reward ratio will be intact.

#3 Establish Your Profit Targets (The Fibonacci Extension Levels)

  • The Fibonacci Extension Levels work beautifully as profit targets, I draw them as +21.4, +38.2 and +61.8 which simply means that these levels are 21.4%, 38.2% and 61.8% above the newly formed Higher High used to draw this Fibonacci study. I have a +41.4 drawn here as well which I am experimenting with, but for simplicity we will stick with the standard Fibonacci Extension Levels in this article.
  • Another tip, in your Fibonacci tool in MetaTrader you can add in the Fib Extension Levels as negative numbers, for example -0.214, -0.382 and -0.618 and they will be drawn accurately beyond the zero line. You will notice the retracement levels are positive numbers as comes standard in MetaTrader.

#4 Establish your Second Trigger Buy Zone (THE SECOND HIGHER LOW at THE PREVIOUS HIGH)

  • With your first position in profit, there is further opportunity to conservatively  buy into this newly forming trend and add to your winners.
  • You have to move your stop to break even on your first trade to limit risk before adding.
  • After price has formed a 2nd Higher High we are looking for a 2nd Higher Low, which has pulled back to the most recent previous high.
  • In the image attached you will see I have labeled “Strong Buy at 2nd HL” and you can see the momentum in the candle that followed this second Higher Low. At this point traders have a confirmed initial Higher High, a confirmed Higher Low, a confirmed 2nd Higher High and they now are anticipating the 2nd Higher Low.
  • I chose to add five conservative positions in this newly forming trend, and made sure to lock each new position as soon as I was able. This is an aggressive approach and I don’t recommend you emulate it. Two positions in this newly forming trend will suffice.

Best of luck with the strategy. If you have any questions shoot me a note.

Kind regards,

Tyler Lund

US Dollar Analyst, FOREX.TODAY

 

FIB 61.8 TO 61.8

3 thoughts on “FIBONACCI ENTRANCE STRATEGY”

  1. Wayne McDonell - TradersWay.com says:

    Well written. Please make sure to mention the currency pair in the title. Also, it never hurts to have the image higher up the page.

    Cheears! WM

  2. Tyler Lund says:

    Thanks Wayne, those are helpful notes. I agree, it would be better to have the image higher. I’m still getting accustomed to the platform and will type below the image next time to keep it further up in the article.
    Thanks for teaching me this entrance strategy.

    Tyler

    1. MLC says:

      Excellent Analysis

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