The second of our free forex strategies trades a confluence between daily Pivots and Fibonacci retracement levels.
The Daily Fibonacci Pivot Strategy uses standard Fibonacci retracements in confluence with the daily pivot levels in order to get trade entries. My preferred parameters are the 38% or 50% Fibonacci levels in confluence with the daily central pivot. The examples following show entries at the 38%, 50% and 62% Fibonacci retracement levels in confluence with the daily central pivot.
As with all free forex strategies, there are many possible interpretations and variations to this particular strategy. Chris Lori has a key reversal strategy called the Lori P 38 trade, available as one of the six patterns available in his High Probability Reversals Course. My particular take on this strategy is to expand the opportunities provided by loosening the entry requirements in this manner:
- look for an entry on any currency pair where the average true range for the last five day period has been exceeded in the previous day’s trading session
- at the start of the current trading session draw fibs:
- – from the previous days low to high, if price is currently above the current day’s central pivot
- – from the previous day’s high to low, if price is currently below the current day’s central pivot
- look for a confluence of Fibonacci retracement levels with the daily central pivot
- If price retraces to the confluence identified, either enter at market or wait for a confirmatory candle signal to occur at the confluence before entry. Obviously, it is more risky to enter before getting the confirmatory signal, but such an approach gives a greater possible reward to risk ratio.
Let’s have a look at a few charts to see how this works.
The first chart shows a long entry at the confluence of the 38% Fibonacci retracement and the daily central pivot: