فوركس ساتو

FIBONACCI & MODIFIED
In “Forex Surfing” I introduced you to the concept of Fibonacci, and within
“Forex Classics” you have learned even more about this concept. It is not my
intention to delve into a full explanation of Fibonacci techniques as this
subject had been adequately explained in those other eBooks. In this section I
intend to touch on these concepts, with a couple of modifications, so that you
combine Fibonacci methods with the “Sailing” styles of trading.
As I have already declared before in my other eBooks, I am particularly fond
of Fibonacci based styles of trading. I have personally found that Fibonacci
works, and that is probably why I love it so much. Applied correctly you’ll
find that it will frequently result in a positive trade, and so I encourage you to
make it a regularly used tool in your trading toolbox. With some successes
I’m sure that you too will grow to love it.
Fibonacci theory can be applied in all the various chart scales. Fibonacci
waves (or “Fibs” as I’ll call them from now on) happen on your Monthly
charts and on your 1 minute charts, including all the chart scales in
between. You will also see that the advanced aspects of Fibs, the Gartleys &
convergences, also occur.
When you see a Fib formed on your Monthly or even your Weekly charts you
do NOT proceed to trade them according to the “standard” methodology for
trading Fibonacci waves. The standard way of course is to enter at around the
62% retracement level and placing your stop loss order at the bottom of the
wave. Needless to say that such a stop might require many hundreds,
sometimes even thousands of pips, which is too great a risk.
Fortunately there is a better way. What you do is wait until it comes
approximately to the 62% level (known as the “Golden Ratio”) then watch for
reversal signals. Earlier in this eBook I discussed the “fractal nature” of
trends, and suggested that you zoom into smaller scale charts to get a more
detailed look. You might see “doji”, stars, or other famous reversal patterns
(i.e. King’s crown, double tops/bottoms, etc…) in the various chart scales at
or near that 62% level. In other words, you are looking for “reasons” that
support your suspicions that a market reversal is likely to occur. When a
reversal appears obvious then you zoom into your smaller scale charts (i.e. the
Daily charts or 1 Hour charts) to search for a suitable trading opportunity
(almost any kind would do; some being better than others) to go in the
direction of the expected market extension. As soon as reasonably possible be
sure to replace your stop to at least a breakeven (at same price as your entry
price) or better yet securing a small profit. Once you have secured your stop
to lock in some profit (or a breakeven) then you are in a “free trade”, and just
let your trade run… sailing away to a profitable horizon.
The reason why traders typically set their stops to be at the bottom of the
wave is because sometimes the market will fake you out a bit and dip down little more before going into a full extension. As stated earlier, such a stop
would be incredibly large if you were to trade Fibs on Monthly or Weekly
charts. Thus you now have a modified version of how to trade Fibs (what I
shared in the previous paragraph) so that you can participate in huge trades
and with more lots traded. The tradeoff however is that you have a greater
chance at being stopped out early by a “fake out”. That is ok because you
should have secured a stop at a meager profit (or at least breakeven) so you
shouldn’t have lost any money. What you do is you TRY AGAIN. Sooner or
later an attempt will hold allowing you to run for many hundreds of pips,
sometimes even over a thousand pips. It does require a little more work than
the standard method of trading a Fib (as little as 5 minutes a day isn’t exactly
breaking a sweat) but the potential rewards of trading Fibs according to my
methodologies will allow you to score significantly better profits for
essentially the same market move.
Now what about trading Fibs on smaller time scales, such as on Daily charts
or Hourly charts (or some other similar increment)? Well, finding a tradable
Fib on a Monthly or Weekly chart will certainly provide you with a HUGE
trading opportunity, but as you can imagine they only come around once in a
while. Fibs on a Daily chart happens quite often, and Fibs on an Hourly chart
even more frequently; these are your “bread & butter” opportunities to make
good profits. Feel free to trade Fibs off of these charts by either using the
standard Fibonacci trading method, or (the better choice in my opinion) use
my modified method of trading Fibs, as explained earlier, only of course
modify the scales to better fit the size of Fib you are trading.
Here are a few extra tips about trading Fibs for you. Watch for when a retracement occurs at or near the trendline, which
frequently happens. This is a double “reason” for your trade to go well
as you now have the “reason” of a Fib bounce AND a the “reason” of a
trendline bounce.
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Invest the time to cultivate the skill of recognizing Gartleys (I
discuss this a little later in this section). They certainly aren’t as
obvious to “see” as say a triangle, but they are there. The only way to
condition your eyes to spot them is to actively practice hunting for
them. Go over your charts looking for Gartleys that have happened and
even try to find some that are still in progress. Over time you’ll get
better at spontaneously recognizing them, but I personally find that it is
something that I still have to actively look for. Not only do they
provide you with marvelous trading opportunities, but they also give
you “reasons” for potential support/resistance levels, and the knowledge
of those “reasons” can also be applied to other trades that you do. Remember that a Fib retracement of a wave on a Monthly or
Weekly chart provides a substantial trend that you’ll likely trade on
smaller scale charts. Being aware of the key Fib retracement levels will
tell you where to expect potential reversals in your smaller trends. This
is a valuable “reason” to be aware of. Earlier in this eBook I discussed that there are “trends within trends
within trends”. Be equally aware of the fractal nature of Fibs as there
are “Fibs within Fibs within Fibs”.
 One of my earliest trading innovations (from a long time ago) was
to look for a tiny Fib to enter a trade on (using standard Fib trading
methodology) shortly after the market reversal at the 62% retracement
of a larger Fib. This was my first attempt to get on a Fib by using a
modified Fib entry method… and is a technique I still use
today! Eventually this idea got further refined into the standard
“Surfing” technique. Remember to watch for Fibs on the reversals of trends. I find that
using my modified technique of trading Fibs (as explained above)
reduces my risk against those times that the market ends up continuing
the previous trend. Keep playing around with Fibs. Practice working with them and
use them for your trading. You will find that Fibs will consistently
make you substantial profits.
I wasn’t intending to do so but I’ve decided to just briefly discuss Gartley
convergences with you a bit here.

Ok, very quickly, here are the numbers of the waves.
On the big down wave (on the left of the chart) the high was 112.61 and a low
of 109.03 (obviously this was on USD/JPY). The 79% retracement would be
111.84, and a 62% would be 111.24.
On the smaller up wave (middle of the chart) the low was 109.03 and the high
was 110.83 (exactly the 50% level of the big wave). It retraced to 109.34
which was about the 79% (actual = 109.41). The 1.618 extension would be
111.94 (I know, normally for a 79% retracement you project a 1.270
extension, but you look at both, just incase, as actually happened in this case),
and the 1.270 extension it would be 111.32.
In an ideal world the price “should” have reversed somewhere between 111.24
and 111.32, but as it happened it actually reversed at 111.78 which was very
close to the 79% retracement of the big wave and close enough to the 1.618
extension of the small wave.
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This is a “real world example”, meaning that this isn’t “text book
perfect”. Sometime I prefer to show you “not perfect” examples so that you
know what to expect when you actually trade in the real world, and so that
you don’t have unrealistic expectations and miss many wonderful trading
opportunities that weren’t exactly “perfect”.
Ok, so why am I showing you this more advanced Fibonacci
application? Simply put, by learning to recognize Gartleys and Fib
convergences you will find potential “reasons” for likely reversals to occur
around certain price areas. This way you are not caught off-guard and
surprised when a reversal occurs, and you can even come to anticipate them…
preparing you to make appropriate trading decisions.
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