A lot of my trading decisions are base on Fibonacci. Fibonacci is a huge subject and there are many different Fibonacci studies in the market. For JG Sniper Club, we are only focusing on retracement and extension to determine entries and exits point.
Fibonacci Retracement Levels
38.2, 50, 61.8
Fibonacci Extension Levels
1.618, 2.618, 4.236
You won’t really need to know how to calculate all of this. Your charting software will do all the work for you.
Imagine you are riding on a very smooth up trend, out of the blue, price start to retrace and erode some of your profits. You start to tell yourself, it's ok, this is just "retracement". How many time your so called "retracement" went all the way to wipe out your profits and you are down in negative? Ouch... I feel your pain.
Wouldn't it be better if we have the S/R lines to inform us that market has reached it's peak and it's time to take some profits, so much so that if the drop is not a retracement but a change of trend, our capital are not affected too badly.
Traders used the Fibonacci retracement levels as potential support and resistance areas.
Since so many traders watch these same levels and place buy and sell orders on them to enter trades or place stops, the support and resistance levels tend to become a self-fulfilling prophecy.
In order to apply Fibonacci levels to your charts, you’ll need to identify Swing High and Swing Low points.
Once this is done, you will get your risks and rewards for this trade plan. Trading is a game of probabilities and capital management. When you learn to think in probabilities you will be on the path towards trading success, because you will be viewing the market from an objective and mathematical mindset instead of an emotional and illogical mindset. It begins with having a definable market edge, or a trading method that is proven to be at least slightly better than random at determining market direction. The power of risk to reward comes in with its ability to effectively and consistently build trading accounts.
Day 2, A Fibonacci is confirmed and final. Now is the time to "WAIT".
Professional fishermen behave very much like a sniper in the military. A pro fisherman doesn’t move around constantly because that would cost them more fuel, time and labor preparing rigs each time they move, and of course more bait. They are seasoned professionals who strategically plan where to fish, reading the ocean and weather to give them an edge.
Professional sniper traders set their anglers at the FIB level once a Fibonacci are confirmed and Final.
From day 2 when Fib is finalized, Sniper traders have to sit and wait for the price to come to the right level for entries. It only came on day 5.
Risk & Reward for this trade plan are now finalized. 20 tics risk and 62 tics reward.
Futures are trading on margin. If your current capital ==> $50,000 and if the margin for Nikkei 225 is $3,500, the maximum that you can load into this order is only 14 lots.
If we are taking 14 lots, we risk 14 lots x 20 tics = ~$6,160; and we are rewarded with 14 lots x 62 tics = ~$19,096
For illustration purpose, we shall place 8 lots for hourly chart. Risking ~$3,520 & reward with ~$10, 912. The balance 6 lots, we will be using it for bonus trades in LTF.
On a smaller time frame for day 5, it look like this:
Price traded to PAPLine-R3 as well as Sky and showed rejection. This levels coincide with *HTF Fib level.
Since we have a downside bias (base on HTF Fibonacci), sniper traders trade plan is to focus on "short" until HTF reached "REWARD/PROFIT level".
As mentioned above, we will have 8 lots on HTF and 6 lots for LTF.
A *SLBW formed on day 6 LTF. An extra 16 tics profit from a LTF price move. 6 lots x 16 tics = ~$2,112
On HTF, target profit is still far away.
Day 7 on LTF, a Head & Shoulder formed with 28 tics profit. That equals to ~$3,696.
Chart patterns will greatly help us spot conditions where the market is ready to break out. Head & Shoulder pattern is formed by a peak (shoulder), followed by a higher peak (head), and then another lower peak (shoulder). A Fibonacci will be used to connect from the Head to the right shoulder to get the target exit.
Once the target is hit, then be happy with your profits.
On HTF, target profit is still far away.
Day 8, another SLBW day on LTF on opening. On the same day, HTF finally reached it's target profit.
LTF SLBW cashed out 22 tics x 6 lots ~$2,904 as well as 423 Effect that profited another 29 tics x 14 lots, ~$8,932 (since HTF has already cashed out profit and LTF is having a high probability setup).
We all wanted to be successful traders! Therefore, we need a SOLID TRADE PLAN! A trading plan defines what is supposed to be done, why, when, and how. It covers your trader personality, personal expectations, risk management rules, and trading system(s).
A SOLID trading plan will help you to limit trading mistakes and minimize your losses. It will also help to remove any bad decision making in the heat of the moment. When you followed your plan, it will help you to limit trading mistakes and minimize your losses. After all, “If you fail to plan, then you’ve already planned to fail.”
It may be tempting to trade by the seat of your pants, but if you don’t develop clearly defined trading plans to follow, and follow them consistently, you’ll have difficulty making consistent money as a trader.
A trader's tragedy is when you abandon your trade plan and you're rewarded. An unjustified reward may increase your tendency to abandon trading plans in the future. You may be prone to think “I was rewarded once; maybe I will be rewarded again. I’ll take a chance.” But the positive outcomes of undisciplined trading are usually short-lived, and a lack of discipline ultimately produces trading losses.
When you stop following your trading plan, you become rewarded for a lack of discipline and you may start believing that abandoning a trading plan is no big deal.
With discipline comes profitability. Don’t let unjustified wins interfere with your ability to maintain discipline. Follow your trading plan, and cement in the mindset that if you follow your plan, you will end up more profitable in the long run.
*HTF ==> higher time frame
*LTF ==> lower time frame
*FIB ==> Fibonacci
*SLBW ==> A Fib pull base on certain market condition that warrant a Fib pull.