Daily Fibonacci Forex Scalping Strategy

Video Transcription:

Hello traders, welcome to the scalping course and the third module, Scalping Setups. In this lesson we’re going to teach you how to look for the 61,8 and 76,4 corrective setups. With these setups we are going to be using the daily fibs and we are going to be measuring the way we learned how to measure them on the second module. Before we start with this module, what I want to express is that there is a big misconception out there that scalpers are traders that get into the market and get out after three, four, or five pips. Most people out there think that scalpers are traders that only take a few pips per trade and they do this hundreds of times per day. If you’re talking about this, you’re talking about high frequency trading and those are mainly algorithms.

The reason we decided to do this scalping course is to correct you and to set the record straight that scalpers are not traders that only take four pips because why would you take a huge risk of entering the market to take only three or four pips per trade if the market allows you to take 30 to 40 pips. This is what we’re going to teach you right now on this course is where to look for the scalping setups, where to put your stop losses, and where to look for your profit targets. And you’re going to see that scalpers are, in fact, traders that look for the same setups day in and day out on the same instruments and they follow a strict path of rules when it comes to managing their trades.

Daily Fibonacci onMT4

Now we’re going to go through a Euro/U.S. Dollar chart and I’m going to show you how the daily 61,8 and 76,4 corrective setup looks like. Okay, so this is the 10-minute Euro/U.S. Dollar chart and you can see that we are going to focus on this trading session of the 31st of March. The session high is this point right here.

So first thing we’re going to do is we’re going to look for the session high and the session low. And the session high is, of course, this point right here, and the session low is this point right here. Then we’re going to go back and grab our Fibonacci retracement tool and just draw it all throughout the day. Now, the first thing you want to do is get rid of all your Fibonacci levels that you’re not going to use, and we are not going to be using the 50, 38,2, 23,6, etc. We are going to be using the 61,8 and we want to color these Fibonacci levels red because they are resistance levels because they are resistance levels because remember we are in a down-trending market right now. So these are the Fibonacci retracement levels and they are red because they are resistance points.

Now because we are scalping, we’re going to go back to the three-minute chart on the 31st. Okay, now we are back, and this is the three-minute chart on this Euro/U.S. Dollar okay, and these are the Fibonacci levels. Remember that this is the 61,8 and this is the 76,4. And we drew them all across the trading session because we always want to be looking for these setups. And remember that these daily Fibonacci levels work all throughout the session. Now, the first thing we want to do is we want price to hit these levels but we also want to be in confluence with previous levels of support that we might be testing as resistance. And you can see that right here we have a base, right here. We do have a base around here, so we’re going to be drawing a horizontal line around these levels right here, these lows.

The price [inaudible 00:04:56] and you can see that actually price was trying to break below this level of support, then here tried to break it and well, we got pushed up. I’m sorry, we got pushed up and then we broke it and then we tested these levels as resistance and then we broke down all the way here. Now, the first thing we want to do is we watch and wait for price to hit the 76,4 level. And the reason we want price to hit the 76,4 level is because– well, we do have a level that we might consider here okay, let me just draw a line around this level, but the thing is that the most important daily level is at this previous area of resistance and now support. So what we want here is the price to hit the 76,4 and to retest these areas or these lows again as resistance.

So what we are going to do here is we are going to be putting on a pending order around these levels. Now, the reason we’re going to be using pending orders is because we want to get filled at the best possible price. But we do want to get filled. So we are going to be putting a pending order just below this level of resistance around the 76,4, okay? That would give us, if we put our pending sale order here, that will give us a 10 pip stop loss okay, which is awesome because I think that’s the best possible scenario in this short position. Now, remember you always put your pending order and I’m going to be using a rectangle to show you the area where the pending order should go and I’m going to color it blue, to make a difference between the rectangles I use where I show you the highs, the lows, and the areas.

Scalping with Fibonacci

Now, this is the entry order or the pending entry around this conflictive zone of previous support now resistance around the daily 76,4. Remember that the 76,4 and the 61,8 are levels. They are not straight lines of support and resistance. Now we have an entry around the low of this box for around 11 pips. That is where our pending order should be, and of course our stop loss should go above this area of resistance because if price breaks above the area of resistance, this scalping idea is invalid and we must get out as fast as possible with as little losses as we can.

So what we’re going to do is we’re going to define our target areas, and of course we always want to divide our trade in two. We want to take profit very quickly at the next conflictive zone. And the next conflictive zone should go around these highs. And the reason we want to take profit at the next conflictive area is because we are now in an up mode, and even though we did bounce from our short entry idea, price could easily be making a new, higher low for a break above these levels. Nothing is going to be certain. So when we have a profit in our hands we need to protect it. Now how can we find this conflictive zone for our first target? The first thing we’re going to do, because we are in an up mode, we are going to draw a small trend line to the up side.

As you can see, the point where we should be taking profit is around, well it’s not around the previous highs but it is around this highly conflictive zone where we tested a support, broke it, tested our resistance, then retested it before breaking higher. And of course we can take profits around here. I’m not going to tell you that you should take profit right at the trend line but you definitely should be taking profit around this area right here. Let me just color this rectangle blue so you understand that we are talking about our entry and not just zones that we point out. So this will be the first target area and if we take profit on the first half of our position here, that would give us a profit of 21 pips. Now, that is our first profit and, as you can see, we are almost 1:2 on your risk to reward ratio which is nice. That’s what we want. We don’t want to be taking negative risk to reward trades or negative risk to reward profits on the first half of our trade.

So this is what we’re going to do, we’re going to take profit on the first half of our trade right here in the next conflictive zone. In this case, of course, it’s the up trend line with the previous basis. And we are going to move our stop losses, which were right here. Let me just point out where our stop losses were, of course, and let me just thicken this line out for you. Because they are stop losses we are going to color them, I don’t know, crimson, maybe, and make them thicker. Okay, so this is our stop loss level, which was right here. Our stop loss level was 11 pips. Now that we have taken profit we are going to move our stops right here at break even or plus one pip because we want to cover the commission costs of the trade. Now, price will definitely bounce from these previous areas or this conflictive zone and will bounce from this trend line. But what we’re looking for is we’re looking for a break below the trend line because the daily 76,4 or the daily 61 setups are very strong setups, price will most likely reverse and try to make a new daily low. And that’s what we’re aiming to do if the market allows us to.

Now, price breaks up and then breaks with the trend line. When price makes a new lower low you will move your stop loss above the previous high. And this is how you’re going to be managing the rest of your active order. When you move your stops to this high you are locking in another 13 pips. Then price makes a new low, so you are going to move your stops above the previous high, which means that you are locking in another 14 pips. Then price makes a new low, so you are going to move your stops above the previous high, locking in another 15 pips. And then you get stopped out right here when price attempts to go higher and breaks again the 78,6.

It doesn’t matter price did not make another daily low, but it could have made another daily low and it could have hit our targets to make another daily low. What you can also be doing here and what you should do is when you are moving your stops down, you also need to pay attention and you could be a little bit moderate in your profit taking and just take profit at this area right here. And this area right here is– let me just grab a rectangle because this is profit taking levels. Okay, this area right here. And the reason we want to take profit at this area right here is because this is the daily low, and we are not going to put our profit targets at the actual daily low. We want to put our targets where we can get filled and where we might find some buyers. So what we are going to do is we are going to take profit at the conflictive zone and let the rest run protecting our profits while waiting for price to hit the next target area which is right here for an extra 44 pips.

So in this trade we made 21 pips plus 44 pips. That’s 65 pips on one scalp. So there you go, scalpers do not take profit after four pips. They take what the market has to give them, and this is what we want to show you here in this scalping course. So this is the first setup we’re going to teach you, and on the next lessons on this module we’re going to teach you the other setups that you might be looking for.


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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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