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#1 20-05-2023 13:46:32

johnedward
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From: Paris - France
Registered: 21-12-2009
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Day Trading with Fibonacci levels

Day Trading with Fibonacci levels


Day trading is a style of trading where positions are opened and closed on the same day or within one day. Day trading involves buying and selling an asset such as a currency pair or a stock with the aim of profiting from rapid price changes. However, day trading can be a very difficult strategy to implement, as it is sometimes difficult to know when to buy or sell.

One of the tools that can help you in technical analysis is Fibonacci. Fibonacci has long been a popular tool among traders, especially for analysing support and resistance levels in the market. If you want to use Fibonacci to make money in your day trading operations, you must respect a few key points in order to optimise your results:

Arrow Use the moving average indicator
Arrow Use price action to identify markets
Arrow Determine support/resistance levels on the H1 and H4 timeframes
Arrow The ideal retracement levels are 38.2%, 50% and 61.8%.
Arrow Stop loss distance between 15 and 30 pips
Arrow A commonly used profit target is between 20 and 60 pips.
Arrow Trade the London and New York sessions

For a more detailed explanation and how to apply these configurations on the chart, read the following.

Fibonacci in trading

In trading, Fibonacci is used as a technical analysis tool that helps traders identify important price levels that can serve as support or resistance. One of the most popular types of Fibonacci is the Fibonacci retracement.

A Fibonacci retracement describes the degree of price correction that can occur after a significant uptrend or downtrend. There are several commonly used Fibonacci retracement levels, namely 38.2%, 50% and 61.8%. The 38.2% and 61.8% Fibonacci retracement levels are considered the most important retracement levels, as price often corrects at these levels before resuming its original trend.

How to day trade using Fibonacci

To use Fibonacci in day trading, just follow these simple steps. First, identify the current price trend, then determine support/resistance levels using Fibonacci and finally, enter the market when a confirmation signal is formed. Here are the detailed steps.

Identify the price trend

Price trends can be bullish, bearish or sideways. The Fibonacci method is commonly used when trending up or down. The moving average is a popular indicator used to identify trends. Additionally, traders can also use price action to identify market trends. The ideal time frames for identifying trends in day trading are H1 and H4. Entry positions will follow the current price trend. If the price is trending up, the position taken is up, while if the price is trending down, the position taken is sell.

Determine support/resistance levels

The time frames used to determine these support/resistance levels are always the same, namely H1 and H4. The Fibonacci retracement is drawn by connecting the high price and the low price with a horizontal line. In addition, the Fibonacci retracement drawdown is also determined based on the direction of the trend. If the trend is up, the Fibonacci retracement line is drawn from the bottom to the top, and vice versa.

Entry when confirmation signal forms

For optimal input, you can use smaller time frames such as M30 (30 minutes) or M15 (15 minutes). These smaller time frames allow you to react to price movements more quickly and maximize trading opportunities.

You can use technical indicators, candlestick patterns or momentum signals from indicators to confirm entry signals identified based on Fibonacci levels. One of the indicators that you can use as an entry signal is Stochastics: a sell signal is confirmed when a crossover above 80 occurs or a buy signal is confirmed when a crossover below 20 forms.

Set your stop loss and take profit levels

After entry, remember to set a stop loss (SL) and take profit (TP) suitable for day trading. The distance of the stop loss used is an important factor in risk management. In this context, the stop loss distance generally used in day trading with Fibonacci is between 15 and 30 pips.

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