Here is a video on using Fibonacci retracement levels in trading. Even though this is on the forex market the same technique can be applied to stocks as well

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Hi Geoff thanks for posting the video ive played around with fibonacci before, is anybody useing or backtested fibonacci on Bills trading method.

cheers guys

Julian

Fibonacci is too relaxed for my trading method, I use a much tighter stop and even that can run a way if you're not careful. 38.2 is too far away to effect a tight stop loss and would lead to unacceptable losses. My system is quite powerful (in both directions) and so you'll need my tight candle based exit signals in order to save your trade from going any further than 15% loss (I prefer 5-10%).

However, it can be used if you're feeling really brave once you have a massive profit up already. For example, if your day trade has escalated beyond (say) $10,000 and you think it's got more to go, my candle based exit system would stop you out quite early when the Fibonacci retracement level of 38.2 might provide a bounce followed by even greater profits but I think that anything above $5,000 in one day is plenty for us who are still rubbing our eyes from the bright sunshine after have emerged out of factories where we were previously only "worth" a couple of hundred dollars a day.

Anyway, (sorry, had to chuck that in) Fibonacci isn't really tight enough for the powerful day trading method I use as you would lose an unacceptable amount of capital before the "fibster" said "get out".

A 5-10% stop loss sounds good to me. I wouldnt use fibonacci as an exit strategy but maby just for profit targets but that's all.

5k trades sound good to me:2tu::beach:

Cheers mate great reply

Julian

Hi Julian,

I am not privvy to what Bills trading method is so I can not comment.

As for a Fibonacci a method that i have used is to use them say after a 24 period donchian channel break and if I get a Fibonacci pullback to either 38.2 or the 50% level and I see a bullish candlestick (ie I am going long for this example) then I use the High +1-2 and the low-1-2 of that candlestick and divide my risk by 2% of my capital (ie I never use more than 2% of my trading capital on anyone trade)
:biggrin:
Cheers

Sounds pretty complex. I find that complexity is my enemy when it comes to the fast paced day trading. Simple, simple, simple. That's what I like. My bourse tool bar is practically naked.

I see a trend or a breakout, get on and get off when there is enough profit or I've suffered enough loss and I use all my trading capital to expose me to as little of the stock market as possible. I have found through countless experiments that using anything less than your full horsepower produces either too little results or tells me I'm too scared or not confident enough of my analysis to trade. If I used 2% of my capital in day trading I'd give all my money to brokers within a very short time.

Day trading options is not for the squeamish however and I think everyone knows that going in. I'd prefer to use all my capital and wait for a sure move. By "all" of course I do mean all available for this method. With $20k on the line I'm going to presume traders have a reserve or they can afford to lose it if the worst happens and they lose too many times in a row. For me this isn't about being "safe" as there are plenty (too many) other courses and educators out there appealing to the "safe" mindset. My method is for those going for the maximum experience and massive cash flow potential but being such a powerful method I've found that allowing a 38% or 50% retirement is more than I can handle. However waiting until after a retracement is another thing and I raised my eyebrows at that concept.

I might look into that a bit more however that would make the trade internal for me and that's best left to people who are using entirely profit as there trading capital. Something that generally doesn't happen for a few weeks or months.

Thanks for your input.

Hi Bill,

The method is to wait for the retracement to occur and then jump on. Hence why you are waiting for a Bullish candle pattern to appear, also if the retracement goes beyond the 50% level you leave it alone. You buy at the high+1 ie if the high is 2.01 then you buy when it hits 2.02. Stop loss is set to the low-1 ie if the low was 1.80 then you would set it to 1.79.

Cheers

I'll give it a try to see if it helps. Thanks for the input.