In this article I have prepared an interesting counter-trend strategy for you using the Fibonacci indicator. This strategy has shown good results when trading on the Forex market, and if you correctly apply the tactics of money management, lot management, and also correctly set stop loss and take profit, then this system will bring very good profit.
So, to describe this trading system, let's choose the GBP / USD financial instrument with a four-hour timeframe - H4. We also use two indicators, namely: the Fibonacci indicator, which builds Fibonacci levels from the moving average, and Momentum Pinboll, to identify overbought and oversold situations in the Forex market.
How to enter the market using a strategy using the Fibonacci indicator and Momentum Pinboll
If the indicator line closes above 70, it tells us that the market is overbought. If the level is below the 30 mark, this is an oversold state in the Forex market. In such situations, when the price enters these levels, we can expect the movement to reverse in the opposite direction.
Critical levels are displayed on the Fibonacci indicator - these are 50% and 61.8%, marked in yellow and red, respectively. When the price closes above the 50% level (in an uptrend), we can look for a sell signal. If it is below 50% (during a downtrend) - a buy signal.
Now let's take a closer look at the rules for entering a long or short position for this system and the Fibonacci indicator.
When the price crosses the 50% Fibonacci indicator line, we look for an additional overbought signal in the Momentum Pinboll window, if such a signal is confirmed, then only after that we enter a short position
Similarly, when the price, being below the moving average, dropped below 50% and the Momentum Pinboll indicator confirms an oversold signal - we enter a long position (Buy).
The longer the price stays above (or below) the 50% Fibonacci indicator, the more often we enter the corresponding position, operating with overbought / oversold signals from the Momentum indicator.
Regarding stop losses, in this strategy we do not set them, here we can set limits on the number of open orders. For example, we are ready to open 10 positions with minimum lots. After all the signals that, according to the rules of the strategy, allowed us to open these orders, then after the opening of the tenth order we stop entering the market and diligently wait for the movement to turn in our direction.
Recommendations for exiting an open position for a strategy with the Fibonacci indicator:
When the price, after opening all orders, went in our direction and reached the level of the moving average, close the first open position, for all others, set a breakeven. Then, when it reached 23.5% of the Fibonacci line, we close the second position and move the stop losses of the remaining orders to the level of the moving average, etc. for each next position.
So, friends, I hope this trading system using the Fibonacci indicator will bring you profit.