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I have found a new indicator online and it has transfomed how I see support and resistance. It is based on fibonacci levels taken from the highs and lows of the previous days candles. What is incredible to me though is how the price respects those levels almost as if you had drawn the levels by hand after the price goes there. Take a look at this usd/jpy trade I took using them yesterday. I traded the 15 minute chart using the 60 minute and hourly charts to confirm the direction of the price.
15 minute chart below, please note the blue lines are fibonacci levels put on the chart BEFORE the price had reacted to them.
60 minute confirmation chart below
four hour confirmation chart below
As you will see from my previous posts I never stop learning, I trade using numerous different methods and indicators but a few things never change.
I always use trend analysis, I must always have the stepping trend of a low, a high, a higher low and a higher high, the opposite for a sell trade. I always trade with the direction of the price on two higher timeframes. So if I see a trading opportunity on the 15 minute timeframe, I use the hourly and four hourly to confirm the direction of the price.
Look at the 15 minute chart again. The first indication I have for a potential trade is the 20 ema crossing the 50 sma (the blue arrow), then I have to wait for the trend to build, I have marked the series of highs and lows. I want the price to trend through the intraday pivot and clearly close above that level. I must also close above that pivot on the higher timeframe, in this case the hourly chart.
I also must see the yellow line below the price acting as support on both the hourly and four hourly charts, the white line must also be above the yellow on both the hourly and 4 hourly charts as well. If these conditions are not met then the trade is out of alignment and is discounted, move on and look for another setup.
I only found this free fibonacci tool 36 hours ago but I am incredibly excited by it. I have spent the last few years learning how to draw support and resistance levels manually. I trade profitably using my old method but this fibonacci indicator instantly helped me see a trend forming more clearly, it may just be the grid effect but I like it all the same.
Have a look at the same 15 minute chart with everything but the fibs removed.
The key here is the trend analysis, the series of highs and lows. Once you have a trend in place then you could use pure price action at those fibonacci levels along with candlestick analysis to take the trade. Look at the candles for confirmed bullish signals on the two higher timeframes. You can trade these fibonacci levels without all the indicators and moving averages (ma’s).
Add a few static trendlines for possible areas of support and resistace, resistance levels are your profit targets. Look at the h4 and then 15 minute charts after I add a few trendlines.
15 minute chart below
in order to clarify what I mean about using the h1 and h4 timeframes to make sure we are trading with all three timeframes aligned I have created two charts for a trade that looked to be setting up for a perfect long entry. By looking at the H4 chart we can easily see the white was below the yellow and the price was also below the yellow. It was therefore acting as resistance above the price and not support. Compare the two h4 charts for the successful usd/jpy trade against this failed nzd/usd trade.
H4 example of non-alignment below
and the example of a correctly aligned h4 chart from my usd/jpy trade
Practice makes perfect as they say, you need to learn everything you can about trend analysis, then learn how to draw support and resistance lines manually. Fibonacci levels are important as well because the whole financial markets use them. Moving averages are important for the same reasons. The 20, 50, 100, 200 and 365 are probably the most widely used moving averages. It is important to remember the whole world sees the charts at exactly the same time, the levels may be interpreted differently, but as traders we need to be trading with the big boys not against them.
I personally learned how to trade across all time frames with the help of the fantastic team at the www.fx500club.com They have a live forex chat room and share their charts so that you can watch them find potential trades in real time.
They also have a school for learning how to trade longer term charts at www.fxmonkeyschool.com.
The fx500club and fxmonkeyschool, forex trading school don’t just trade charts and indicators alone, they teach us to use correlation of the whole market before entering a trade. It truly is the best place to learn how to trade forex properly, safely and profitably. It’s all about the pips and about protecting your capital.
Click Here to get a FREE days entry into the fx500 club live trading room
Always Remember.
Keep your risk as a percentage of your capital low (1%), equals stress free trading.
Always work out potential losses before potential profits.
We are paid to take risks, if you aren’t in a trade you cannot win a trade!!
Buy off support and sell off resistance.
Bank partial profits early and move your stop loss to break even as soon as you can.
Click Here to get a FREE days entry into the fx500 club live trading room