Finding Fibonacci Clusters

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Video Transcription:

Hello, traders! Welcome to the Pro Trading Course and the seventh module Trading Like a Pro. In this lesson, we are going to discuss how to find Fibonacci clusters. And now that we have learned how to actually look for high probability setups, I think that if you learn how to find Fibonacci clusters on those setups, they’re going to be even more reliable.

So what we are going to do is I’m going to go to the U.S. dollar/Canadian dollar chart. And this is a trade that we just took. We took a buy on the U.S. dollar/Canadian dollar, and, of course, your stocks are going to be all the way down here before the previous low.

Now, why did we take this buy on the U.S. dollar/Canadian dollar? Well, that’s pretty simple. Right now, we are in the one-hour chart. So we are going to the daily just to find out where are the zones of support or resistance. Now, I’m going to go ahead and put on another color for my horizontal support line. And I’m going to go back to the hourly.

Finding Fibonacci Clusters

Now, as you can see, this is a clear support on the daily. And the entire support zone goes all the way to the previous low, which is this level right here. So we can put on a nice rectangle, a nice peach rectangle like we always do to better visualize this zone we’re talking about. So we took a buy here out of this area of support, but this is not the only reason we took it.

Now, we actually found a Fibonacci cluster around this zone that made for this trade or for this setup even more reliable. We are first going to draw the Fibonacci retracement from this low to this high or the entire move to the upside, all right? And as you can see, we went through the 50, the 61.8. And of course, we went through the 76.4. And right now, we are at the 88.6, which is a very strong Fibonacci retracement level when we’re talking about harmonics. And as you can see, we are right there at the 88.6.

Now, there’s also a bullish harmonic pattern right here. But right now, we are just talking about Fibonacci clusters. And what the bullish harmonic pattern is doing is making this an even more reliable buy setup for a very strong risk-to-reward scenario. But what I want to show you on this lesson is how good Fibonacci clusters can be.

Finding Fibonacci Clusters1

So we are at the 88.6. That’s a first Fibonacci retracement level, which is fine, and it’s a very strong one, just above the area of support. But we need more confirmation of this as a buy setup. Now, the 88.6 tells us that, at this retracement level, we are going to find buyers. We also need to know if this is a Fibonacci level where sellers are going to be taking profit. And to do that, we are going to grab the expansion tool. And we are going to look for an expansion of this move, all right, of this move, from this high to this low to this high. I’m going actually to name them, name XAB.

We need an expansion of this move, because what happens here is that sellers came in on the B point right on this move to the downside. Because we are in a very strong down move or practically ranging in a very strong down move, traders and smart money are going to try to short the U.S. dollar/Canadian dollar. And it’s going to happen at a retracement. And this retracement right here was right at the 76.4 if I’m not mistaken. So we are going to change this one right here, 76.4. And you’re going to see that it also confluences with a level of previous resistance, this one right here.

Finding Fibonacci Clusters2

So this was a very strong sell signal, okay? And what we need to know is that not only we want a retracement level where buyers are going to be stepping in, but we also want an expansion level where sellers might be taking profit from their trade. And as you can see right here, we are also at the 161.8 expansion level, which is the first level that traders or that short-sellers are going to be looking for taking profits on their short trade from B to this low for 270 pips. So not only we have buyers coming in at the 88.6, but we have sellers closing their short position at the 161.8, which means that it really doesn’t matter if we have actual buyers or sellers closing their position, because the reaction in price is going to be the same. It’s going to be a rejection of this level and a move to the upside.

So finding Fibonacci clusters is not just about finding ratios that align with each other. It’s finding reasons why price might bounce from these levels. And in this case, we have two reasons, well, three reasons. We have the zone of support. We have buyers coming in at the 88.6 and sellers closing their positions at the 161.8.

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