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Posted on February 13, 2008 by Jon Provencher | Posted under Currency Trading
Use Fibonacci to Time Your Forex Trades
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The ICWR forex strategy has been developed using a mix of the Elliott Wave Theory and Fibonacci ratios. Traders have discovered that corrective market movements have a tendency to retrace the preceding impulsive market movements by a Fibonacci ratio. So what are corrective market movements? Corrective market movements are short-term corrections that move against the long-term market direction. The major market movements in the direction of the long-term market are referred to as impulsive market movements. Open up a chart of a major currency (say the GBP/USD) with the interval set on daily and you will see clearly the long-term direction, along with several corrective market movements. The most common Fibonacci ratios observed in the ICWR forex strategy are 25%, 38%, 50%, 61% and 75%. Most traders use the ICWR forex strategy with an existing entry strategy to help refine their exit strategy to squeeze out the maximum gain possible from the trade. Many traders have discovered that managing a trade and determining the exit level is even more important than selecting an entry point and direction to trade in. The ICWR forex strategy is very easy to use. Simply bring up a chart of an interval you want to trade, find the preceding impulsive movement (in the direction of the long-term direction) and calculate the Fibonacci ratios. Now enter the Fibonacci ratios on your chart. For example if the preceding impulsive movement UP was 100 pips, for the Fibonacci ratio of 25% you will place a line 25 pips below the maximum of the impulsive movement. Most charting packages come with a Fibonacci tool built in, calculating the ratios and drawing in lines for you. These Fibonacci ratios can then be used in several ways: - move your stop loss with every impulsive movement in your favor to maximize gain and minimize risk (the 75% ratio is commonly used for this) - estimate when the corrective movement is likely to conclude in order to estimate the best entry points. Traders often tend to despair when their trade is in gain and it starts to move against them. By using the ICWR forex strategy you will be ready to ride out the corrective market movements in order to squeeze out the maximum gain from your trades. For more information on trading forex visit the link below. About The Author: Jon is the owner of iBlogForex, a blog about every aspect of the Forex market including Forex trading methods and strategies. |
Tags: ICWR, ICWR FOREX SYSTEM, ICWR FOREX STRATEGY, FIBONACCI
