فوركس ساتو

Fibonacci Theory 101
I’m not going to bore you by telling you much about the history of
Fibonacci, and how it applies to nature (i.e. breeding of rabbits,
growth patterns of sea shells, pine cones, trees, humans, etc…). I’ll
just get right to the nuts and bolts of the technique of how it applies
to trading.forex sato
First thing you’ll notice is that this technique is incredibly simple,
but believe me (and the many thousands of traders who use this
technique) it is amazingly profitable. At first glance it seems too
simple work, but it does. This technique ALONE consistently
makes fantastic profits, and has been my personal absolute favorite
of all techniques – definitely my most used strategy of all standard
technical analysis tools. It’s incredibly powerful, especially when
used in advanced ways (Gartley’s & Convergences – not really
covered in this eBook). I won’t discuss why Fibs work so well
(trader psychology / “self-fulfilling prophesy”) but just look at your
historical charts and you’ll see that it does.
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For sake of convenience, in all explanations of Fib theory here I’ll
simply focus on up moving prices. Everything applies conversely to
down moving prices, just flip everything I say upside down.
As you are already aware from this eBook, prices don’t move in
straight lines; they move in waves, or “swings” (as it is often
referred to in Fib theory). Just like how prices move in “waves”, as
described in the basics of this eBook, prices move up, they then
“retrace” down, and then they continue to move up. When the
prices move up again from the bottom of the “retracement” and go
above the top of the swing (or wave as we’ve been calling it in this
eBook) then that is usually called an “extension” in Fib
terminology. Below is a diagram to illustrate this.forex sato

In this diagram, the red line shows you the overall swing. The green
line shows you the prices as they’re bouncing around, but overall
conforms to the “swing”.
Swings can be seen (and traded) in all chart time views, but most
traders typically look for swings on hourly charts.
In the Resources Section (resources website) you’ll find a Fibonacci
calculator. Go and download this, as you’ll need it for the following
steps.
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Now, what you do is you find the low price of the swing, and the
high price of the swing, much like you have already learned to do.
Enter your high price and low price into the Fib calculator. The
calculator then will show you Fibonacci “resistance levels”, and
“extension levels”.
What are “Resistance Levels”? Again, I’m not going to explain to
you the math and theory of why these specific numbers are
significant in this eBook. Just know that for some magical reason
they are. The “resistance levels” are the high probability points of
where the prices will “retrace” down to before bouncing back up
(forming your “extension”).forex sato
There are four main Fibonacci resistance levels. They are 38%,
50%, 62%, and 79%. Actually these have been rounded up to the
full percentage. For example, the 62% is really 61.8%, but for sake
of convenience most traders often refer to them by the full
percentage.forex sato
These percentages refer to how far the resistance level is. For
example, the 38% level is 38% of the way down from the top, the
50% level is obviously right in the middle, 62% is about two-thirds
back down, and the 79% is 79% down. 100% would be that the
price dropped all the way back down to the bottom price.
Let’s look at an example to clarify things. Let’s say you have a
swing on some currency pair that happens to be 100 pips (of course
in the real world your swings would be smaller or larger). Let’s say
your low price is 1.2100, and your high price is 1.2200. Enter those
numbers into your Fibonacci calculator and you’ll see the following
numbers displayed (for the up swing).
These are your fibonacci levels of support, meaning that when the
prices are moving back down, your retracement, they should bounce
off (within a few pips) one of those four levels of support. The
magic level of support for FOREX trading is the 62% retracement
38% = 1.2162
50% = 1.2150
62% = 1.2138
79% = 1.2121
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support, as this is the most common (and profitable) level to enter
your trades on. Often while prices are moving down to the 62%
level you may notice them bounce a bit from the 38% and 50%
levels.
How most traders enter a trade using Fibs is they place an entry
order at the 62% level, and a stop at the 100% (full retracement back
to your original low).
Ok, so where do you exit your trade? After prices have retraced
down they will then typically start an extension. Some times the
extension happens nice & straight, but often it just sort of bounces
along upwards. Now here is the nice thing – you can calculate the
price of your limit exit thanks to fibonacci.
In your Fib calculator you see that it gives you two more numbers,
which are your extension targets. If your retracement bounced off
of the 38%, 50% or 62% then your target is the 162% extension. If
your retracement dropped to 79% then your target is the 127%
extension. So from our example above, you would set your limit at
1.2262, but if you had a retracement down to 1.2121 then your limit
would be 1.2227. Keep in mind that usually it’s best to subtract a
few pips (say 10 pips) from your limit target. By going for a few
less pips means that you’ll exit the trade for profit. It really sucks to
miss taking profit because the market turns around just a few pips
before your limit order.
After you have completed such a trade then look to see if the
extension itself becomes a fibonacci swing on it’s own.
Here is a chart example of fibonacci swings. While writing this I
decided to go look for some nice examples to show you. Well, I
wasn’t too surprised when I turned on my charts (which default to
see EUR/USD in 5 min candles) to see a text book perfect example
to show you. You can see that I took this screen shot in real time
because of the color of the last candle. Here you see a live example
of two fibonacci swings, where the extension of the first swing
became it’s own swing. To make this screen shot even more perfect
the second swing bounced at each of the four retracement levels, and
the extensions of both swings hit perfectly. The following screen
shot is text book perfect to show you… but the amazing thing is that
many, many times you’ll see fibs line up text book perfect. Note
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that in this section I explained up swings, and said that everything is
conversely true for down swings. This chart shows down swings.forex sato
Below is a list of the prices from the above chart. The first swing is
Point A to B, retraced to C, then extended to D. The second swing
is Point C to D, retraced and bounced E (38%), F (50%), G (62%)
and H (79%), then extended to I.
Now look at this chart and see how you might have traded this with
the “Surfing” approach. (Hint, variations 2 & 3, but 2 would have
done it for you) You can certainly use fibonacci techniques in
conjunction with the “Surfing” approach. In fact you’ll see that they
have a lot in common.
*****************************
A 1.2166
B 1.2124
C 1.2148
D 1.2094
E 1.2114
F 1.2121
G 1.2128
H 1.2135
I 1.2075 (and it kept going down)
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It is usually best to look for fibonacci swings on hourly charts. Of
course you’ll see them on larger and smaller chart views, but again,
it’s best to spot them on hourly charts for the purpose of this
technique.
What you are looking for are “High Probability” areas to jump in on
a trade. Normally, as a Fib trader you would look to get in on a 62%
bounce to catch the extension for some nice profits, but here you’ll
learn a few less common ways to trade Fibs. We’ll look at some
“Fibonacci Variations” to catch standard extension trades with lower
than usual risks, but you’ll also learn a variation to jump in on a
retracement (which most traders would normally not do).
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