The Best Fibonacci Retracement Strategy for All Traders

Fibonacci Retracement Strategy

If you have been looking for the best Fibonacci Retracement Strategy, look no further than what our team here at Trading Strategy Guides has developed! The Fibonacci Retracement Channel Trading Strategy is designed for any market and any time frame. This strategy is not just for Forex traders. It’s also applicable to those trading in stocks, options, and features!

The reason we made this one-of-a-kind strategy is that we wanted to show the world how powerful the Fibonacci retracement levels/lines are and why the market respects these lines on a consistent basis.

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I can go deep into what the Fibonacci Retracement Lines mean, but we cover that extensively here in our Fibonacci Trend Line Strategy.  So, if you are new to the Fibonacci world, go ahead and read that article and come back here when you finish reading.

Also, this strategy is designed to trade inside the channels, not a break of one! Our popular Rabbit Trail Trading Strategy shows you how to trade the break of a channel.

Important Tools for the Fibonacci Channel Strategy

Before we get started, let’s look at what tools you need for this Fibonacci trading strategy. The first and ONLY tool you need is the:

Fibonacci Channel Indicator

This indicator may look different for you depending on what platform you are using (Tradingview, MT4, Tradestation, Ninjatrader). They all come standard on your platform. This is similar to the Fibonacci Retracement tool, but you can only turn the FIB levels to the upside or to the downside.

Like this:

Fibonacci Channel Indicator

This will allow you to make perfectly straight parallel lines on the support and resistance points on the uptrend or downtrend. Check out the What Goes on at Support and Resistance” areas if you have no prior knowledge as to what this is.

Now, let’s discuss the rules of this Fibonacci strategy.

The Rules for a Sell Trade Using This Fibonacci Trading Strategy

Let’s delve into the rules governing a sell trade. This part of our guide is designed to provide clear, step-by-step instructions for effectively using the Fibonacci Retracement Strategy in selling scenarios.

Moreover, this ensures that traders can navigate the markets with precision and confidence.

Step #1: Find a Strong Downtrend/Uptrend That Is Forming

This step is critical to get right. You need to find a strong current uptrend at this point. More often than not, you will see this occur on a trend reversal. Not all the time, but a good portion of it. Take a look:

Finding A Strong Current Uptrend

Here, we can see a nice uptrend before it broke the line of support and headed to the downside. At this point, you need to continue to wait if the price will “bounce” off of a certain level and head back to the upside.

**Note: Our Fibonacci tool is not in play yet. At this point, we are waiting for the price action to head back to the upside, hit a “resistance” level, and then head back to the downside, forming a “Channel.”

Which brings you to…

Step #2: In a down Trend, Wait for Price action to Consolidate and Head Back to the Upside

Here is what this looks like:

Consolidation In Price Action And Heading To The Upside

Again, there is nothing here we are interested in trading. The price action needs to head back to the upside and consolidate. Then we are ready for a sell entry.

Step #3: Wait for the Price Action to “Hit a Ceiling” Or Consolidate Again

Here is what this step will look like:

The Price Action Consolidates Again

You can see in the chart above that I labeled each step of this Fibonacci strategy. Each step is colored. So, at this point, here is what has happened:

  1. Price action broke a main up trend and then caused a long bearish trend (Step #1).
  2. Then, after consolidation, the price action went back to the upside (step #2).
  3. This uptrend continued for quite a while before finally consolidating again (step #3).

Step #4: Apply the Fibonacci Channel Indicator

I will walk you through where to place this indicator. You already did most of the work already, following the steps from one to three, so this step should be very simple.

Place the Fibonacci Channel Indicator on consolidation #1 and consolidation #2 in the direction of the channel.

Like this:

Placing The Fibonacci Channel Indicator On Consolidation #1 And Consolidation #2

Once you do this, congrats! It’s now time to search for a trade…. After it shows you one more thing to confirm that this is indeed a channel.

Step #5: Wait for Price Action to Push down and Pull Back (Make Entry after Pull-back)

Here is what this looks like:

The Price Action Pushed Down And Pulles Back

Great! Do you see that it hit our channel line on the pull-back? That is exactly what you want to see!

Here are all the steps so far:

The Consolidations For The Fibonacci Retracement Channel Trading Strategy

Take a minute and study this picture above. There is a lot to digest there!

These are the main five steps it takes to make a SELL entry based on this strategy. Simply follow each step by color, and you’ll get your first entry!

Sell Entry #1 and Entry #2

Now, you already know where to enter the first trade.

Right here:

Making The First Sell Entry

Here, you want to press your winners with this strategy, so when the price action hits the 50% mark of the Fibonacci Channel indicator, you make a second entry!

Making The Second Entry Using The Fibonacci Strategy

So, at this point, you have two trades on, both in profit.

Take Profit/Stop Loss

When the price action hits the 100% Fibonacci channel line you drew, you will close both trades immediately, no exception!

Take Profit/Stop Loss

This is the other support level. When the price hits this level, there are many things that could happen (mostly bad).

You see, a lot of buyers know this level, so they have BUY entry orders sitting at the 100% line of that channel. Once price action hits that level, it’s going to trigger all of those buy entries (along with many sellers getting out), and this is what’s going to most likely happen:

Entry Orders

It’s simply traders making trading decisions!

You want to use a trailing stop loss. So, as the price moves down, you will be moving your stop loss accordingly. There are advantages and disadvantages to using a trailing stop. Our team tested a few different methods with this strategy and agreed that a trailing stop loss is the way to go with this Fibonacci Channel Trading Strategy.

Here is what it would look like during the trade.

Moving The Stop Loss To The First Entry (38% Fib Line)

Once the price actions touch the 50% Fib line and we add a second entry, go ahead and move your stop loss to your first entry at the 38% Fib Line. This will lock in some profit in case the price action decides to turn on you and head to the upside!

Once the price action touches the 78% Fib line, move both stop losses to the 50% Fibonacci line. This will lock in profit for the first trade, and you will break even on the second trade! You still win either way.

Take a look:

Current Price Action And Stop Loss

Like I said before, you exit both trades immediately when the 100% Fib Line is touched!

Closing Both Trades Once The 100% Fib Line Is Touched

**Note: The above image is an example of a sell trade using the Fibonacci Channel Strategy. Use the exact same rules (only opposite) for a BUY entry.

Below is a BUY trade example using the Fibonacci Channel Strategy:

Buy Entry Using The Fibonacci Channel Strategy

The Fibonacci channel strategy could make the average trader become great by implementing these simple rules into their trading system.

Another great trading strategy is the CCI trading Strategy which has been helpful to many pro traders.. These channels are formed on all time frames and all currency pairs, stocks, etc…

You need to learn this strategy because this could be all you need to become a full-time trader! By adding to your trades, you are basically doubling your profit!

Some people like to stick with only one entry on a single stock or pair at a time. However, for those who have yet to adopt a strategy in their arsenal, consider the Fibonacci Channel Strategy!

Closing Thoughts

The Fibonacci Retracement Strategy offers a comprehensible and adaptable approach for traders across various markets and timeframes. This strategy highlights the significance and efficacy of Fibonacci Retracement Levels in identifying and capitalizing on market trends.

Whether you are a novice or an experienced trader, the detailed steps and practical examples provided in this guide demystify the complexities of trading using Fibonacci channels. Embracing this strategy could be a transformative step in your journey, potentially elevating your skillset and enhancing your trading outcomes.

Remember, the key to mastery lies in understanding and application, so dive into this strategy, experiment with its nuances, and see how it can refine your trading techniques.

Thanks for reading!

Please leave a comment below if you have any questions about the Fibonacci Retracement Channel Strategy!

Also, please give this strategy a 5 star if you enjoyed it!

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Fibonacci Retracement Strategy Video

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  1. What are your thoughts of the Fibonacci Channel Trading Strategy? Have you traded with the Fibonacci Channel Tool before?

      • We used Trading views Fibonacci Channel Tool for this strategy. This comes standard on all trading platforms that we are aware of 🙂

  2. I have heard a lot about fibonacci and been wanting to learn this strategy. May be this report will turn out to be the missing link. I will give it the required time.

  3. You are doing a great job with the content critical for effective trading it really joyful to visit your blog

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