We continue the section on Forex trading using the Fibonacci grid. And today you will learn how to determine the entry and exit points of the market by trading against the trend. I am often asked: “Which trading style is preferable?” Of course, it is better to trade according to the trend, however, by the time everyone recognizes it, it may already be in the final stage. Therefore, traders who open deals in the expectation of continued movement can run into a deep correction or reversal. Also, do not forget that the trend on TF N1 most often turns out to be a flat on TF D1. Therefore, it does not matter which of the trading methods you prefer.
Trading against the trend using the Fibonacci grid.
Method number 1.
This method has been successfully applied when trading on the pattern “123”. The only entry into the market is carried out not by a breakdown, but by a limit order, with which we will catch the end of the local correction.
Right pretty simple. I will describe the algorithm of actions for opening purchases in a bear market.
- We identify a downtrend.
- We are waiting for a signal to break the trend – after the next low update, the last hi should be broken.
- We apply a Fibo grid to the received bullish momentum.
- At the Fibo mark of 50%, we place a pending limit order (buy limit). As a rule, the pullback in the 2nd wave is quite deep and in most cases, before continuing the upward movement, the price will hook it.
- Determine the marks for fixing profit/loss:
- set profit set at 161.8% Fibo;
- stop-loss is placed a few points below the last low.
Method number 2.
The method is based on the idea of saving large players who fell into a bull or bear trap. According to my long-term observations, after the removal of the crowd stops, the price in 90% of cases returns to the zone of impulse formation. Immediately I draw your attention to the fact that, despite the high number of profitable transactions, the trading strategy has a serious drawback – the position is growing with the help of the martingale and it has long stopped. Because sometimes a transaction can hang for quite a long time, I recommend using it on a separate account reserved for long-term trading.
We turn to the algorithm for opening deals and fixing profit/loss after the formation of a bull trap.
- We identify the bullish momentum.
- After the breakdown of the base of the pulse, we impose a Fibo grid as shown in the figure:
- At the levels of 138.2%, 161.8%, 200%, 261.8%, we set limit orders.
- Determine the levels for fixing profit/loss:
- take profit – 100.0%;
- stop-loss – 423.6%.
Colleagues, please, after testing the above trading systems, to share your impressions in the comments.