- 1 Japanese candlestick chart.
- 1 Moving Average SMA of 50 periods in the High.
- 1 Moving Average SMA of 50 periods in the Low.
- Fibonacci extension pulls.
Entry Rules
- When a candle opens and closes above or below the channel formed by the two SMA 50, open a long position (buy) or short position(sell) respectively. For example, if a candle opens and closes above the channel, the trader must open a long position.
Exit Rules
- If at any time the candle closes near the channel it is best to leave the trade and close the position. Also it is best to always close the position in the Fibonacci level 423.
Rule to cut losses and take profits
- Once in position, the trader must have placed the Fibonnaci objetives (even before placing the order entry).
- After reaching the Fibonnaci level 123, the trader must keep a stop loss at a distance equal to two Fibonacci levels with respect to the price. For example, if the price reaches the Fibonacci level 161, the stop loss would be at level 100 (the average is Fibonnaci level 123).
The author of this trading technique found that this technique gives enough space for the trades to develop and in many cases allows to reach a long-term goal in Fibonacci 423. Also, if a trade signals that in some point it will fail, this methodology allows the trader to take a substantial percentage of the profits as the stop moves dynamically with the price at close range, but not too close (the largest problem when you start moving the stop). Worth mentioning that this is a personal preference of the trader.
In each case the trader can use what best suits for him, because in reality this strategy provides clear entry points. The trader who released this technique states that the Fibonacci level 423 is his aim in all its operations. Finally it is clear that as in any strategy occasionally there will be losing trades. However, these are minimal in fact still 10 or 12 pips around there. However, the winning trades are worth gold. Below are images of an example where this strategy is applied:
