THE FIBONACCI GOLDEN POCKET (THE SECRET WEAPON)There is no doubt that the Fibonacci tool is the most powerful and most used tool amongst traders worldwide, and there's a pretty good and simple explanation to that, IT WORKS.
I mean, I've been trading since late 2013 (damn I'm getting old), and have been implementing Fibonacci into my analysis ever since. It's truly a great tool which shows us powerful support & resistance levels.
As the years went on, my trading evolved, and one of the things I've noticed is that the market always reacted more to a certain 2 ratios in the Fibonacci, which got me exploring those ratios even further. Over time it become more clear to me that these 2 Fibonacci ratios have much more impact on the market than I could ever imagine. Once I started back testing as much as humanly possible, I started to see how the true power of these ratios.
THE FIBONACCI GOLDEN POCKET (0.618 & 0.65)
When drawn correctly & on the correct time frame, this tool showed me exactly where the overall trend was heading and where it would stop and reverse.
With the help of my indicators & knowledge of the markets I was able to determine if the market would break through the golden pocket or respect it and stop and potentially reverse.
I also would like to add that there is no right or wrong way when plotting this tool.
THE TIMEFRAME TO USE & HOW TO PLOT
While everyone has their own methods on how to use certain indicators/tools, I'll tell you one thing for certain, I've spent years perfecting my strategy and the tools I use.
What I found works best, is the a Fibonacci works like a dream on the 1D chart.
So head over to the 1D chart of the asset you are trading.
The beauty of this is that you can choose to plot the tool on a major swing or minor swing or combine a major that has a minor swing in it. There is no wrong way, it's how you read the tool that makes it important.
NOTE: you will have to change the Fibonacci Retracement tool settings at first, thereafter it would be set on those settings for future use.
So, choose the Fibonacci Retracement tool, find a recent swing high and swing low, you will plot it on those points and to get precise plots you will have to enter the high and low of those swing points in the coordinates tab in the settings of the tool.
In the settings of the tool, you will need to uncheck all the levels except the 0.618, and you will add the 0.65 by selecting one of those boxes and entering the ratio and make sure that is checked as well. General styling appearance is up to your liking. Press ok and you can lock your drawing in place and there you have it. You Have Just Successfully Plotted A GOLDEN POCKET.
You can go ahead and find other swing highs & lows and plot more levels to have on the chart if need be.
Used on the 1D chart, these levels act as MAJOR SUPPORT & RESISTANCE ZONES.
You can see where the market is heading to and where it could potentially stop or you can find that the market is currently bouncing off the level so you could go down to a lower timeframe and look for a potential sniper entry to the trend & know where to take profit should there be a level above.
In my approach to using the golden pocket, if the first 1D candle breaks through the level by market close, I already know that the market is going to continue its direction, if the first 1D candle that interacts with the level rejects on it by market close then I know that this is it's stopping point where the market could consolidate and potentially reverse from there.
*DISCLAIMER*
Now please note, I use that golden pocket in that manner because I have other indicators to give me deeper insights as to what's happening, you should not use the golden pocket the way I do unless you have valid confirmation that this is about to happen so I need to keep my trade open or I need to close my trade. USE AS PER YOUR OWN DISCRETION.
I hope this tutorial will help even if it's just one person out there...
HAPPY TRADING :)
