Fibonacci in Action
My Tramline Trading method of analysing markets for swing trades consists of three pillars:
- Tramlines,
- Elliott Waves and
- Fibonacci ratios.
This is a brief lesson in how I use Fibs.
You will learn how the two levels of 50% and 62% represent the two most common targets for trend reversals. Setting these levels on your charts beforehand can give you highly accurate price targets for trade entries and exits.
The Fibonacci sequence of numbers describes how a great many natural life forms grow and decay over time. Fibonacci himself started with the rabbit problem – set one male and one female rabbit together and hey presto over time, how many rabbits are there after so many generations?
His famous sequence is 1,1,2,3,5,8,13,21,34,55, 89, 144, etc with the ratio of one to the previous number tending towards 1.618, the Golden Mean.
There is a good explanation on Investopedia of how the Fibonacci sequence fits into technical analysis.
Of course, not every retrace of 50% or 62% results in a trend change! It all depends on context – and this is where the Elliott Wave model comes in. I will leave that topic for another time.
This is a video of recent action in FTSE and Crude Oil (January 16) showing how I stalk pinpoint trades.
A Short trade at the wave 2 high is currently in profit.
Again, a short trade at the Fib 76% is in profit.
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