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Fine Tuning Fibs

Fine Tuning Fibs

Richard Krivo, Trading Instructor

Instructor's Response:

Yes...it is an excellent tool and you have the right idea regarding its application. That being, planning to enter the trade short in the direction of the Daily trend after a retracment to a Fib level occurs.

Since the pair is trading at roughly the 87.00 level at this time, you are correct that waiting for a retracement of around 600 pips would be a ways down the road.

On the first chart below, the Fib line that was drawn went back to a move that began in early August. 

We would recommend "fine tuning" where you are placing the Fibonacci tool.  By placing a Fib line on a more recent move and/or using a shorter chart time frame, you will find that the retracement needed to enter a position will not be near as great.  Take a look at the second chart below for the "fine tuned" version.

Note on this 4 hour chart how USDJPY pair, at this point, has retraced to the 61.8%. If that Fib level holds, a trader could take a short position with a stop above the 61.8% Fib level.

chart 12 2 09 A

chart 12 2 09
 

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