**Fibonacci Trend Line Strategy: 5 Steps To Trade**

I am going to share with you a simple** Fibonacci Retracement Trading Strategy** that uses this trading tool along with **trend lines** to find accurate trading entries for great profits.

There are multiple ways to trade using the Fibonacci Retracement Tool, but I have found that one of the best ways to trade the Fibonacci is by using it with trend lines. We also have training on Trend Line Drawing with Fractals.

The Fibonacci Retracement tool was developed by Leonardo Pisano who was born around 1175 AD in Italy was known to be "one of the greatest European mathematicians of the middle ages."

He developed a simple series of numbers that created Fibonacci ratios describing the natural proportions of things in the universe.

And these numbers have been used by traders now for many years!

With this Fibonacci trading strategy, you will learn everything you need to know to start trading with the Fibonacci Retracement tool. You're going to find out the Fibonacci meaning, Fibonacci algorithm, Fibonacci biography, the Fibonacci formula for market trading, Fibonacci series algorithm, the Fibonacci sequence in nature, along with many other useful facts about this great tool!

Below is a picture of the different ratios that Leonardo created. We will get into detail later on as to which of these lines we will use for our trading strategy.

Your charting software should come standard with this, however, you are the one that puts this on your chart.

The bottom line is, many traders use this tool which is why it is highly important to have a trading strategy that uses this.

You are going to need to know where to apply these fibs. You will need to place them on the swing high/swing low.

A **Swing High** is a candlestick with at least *two lower highs* on both the left and right of itself.

A **Swing Low** is a candlestick with at least *two higher lows* on both the left and right of itself.

If you are unsure of what that means let’s take at a chart to see what this looks like:

So here is what it would look like then on your chart with the Fibonacci Retracement:

A quick concept to remember about this is that if it is an uptrend, you want to start with the** swing low** and drag your Fibonacci level all the way up to the swing high. If it’s a downtrend you start with the swing high and drag your cursor all the way down to the swing low. You can also read the strategy on how to use currency strength for trading success.

Simple enough. Let’s go ahead and look at all we will need with this trading strategy:

**Trading Tools for Fibonacci Trend Line Trading Strategy**

**1. Fibonacci Retracement**

**2. Trend lines**

This trading strategy can be used with any Market (Forex, Stocks, Options, Futures)

It can also be used on any time frame.

This is trend trading strategy that will take advantage of Retracement of the trend.

Forex traders identify the Fibonacci retracement levels as areas of support and resistance. Because of this, the levels are watched by many traders which are why this strategy could be a difference maker to your trading success.

Since we know some information about the Fibonacci Retracement let’s look at the rules of the Fibonacci Trend Line Strategy.

**Rule #1 Find a Trending currency Pair **

This is simple enough. We need to make sure it’s either an uptrend or a downtrend.

In the example, we will be using today this will be an uptrend. We will be looking for a retracement in the trend and then make an entry based on our rules.

**Rule #2 Draw a Trend Line **

Since you identified already that it is in fact trend by looking at your chart, now you need to draw your trend line.

Draw this on the support and resistance levels as the trend is going up or down.

Once you draw this trend line you are good to move on to the next step.

Trend lines are a key component to trading and I always recommend using them when you can.

**Rule #3 Draw Fibonacci From Swing low to swing High **

Now you can get you Fibonacci Retracement tool out and place it at the swing low to the swing high.

Remember this is an uptrend so we started at the swing low 100% and placed the second 0% level at the swing high.

**Rule #4 Wait for the Price level to Hit Trend Line**

So far we found a trending currency pair, drew a trend line to validate this, and placed our Fibonacci at the swing low and swing high.

This rule is the critical step to the strategy so you need to pay close attention.

Because we need the price moves to hit our trend line, stall, and go back in the direction of the trend.

If it breaks the trend line and keeps going and blows past the **50%, 61.8%, 78.6%** then the trend is obviously broken and you need to look elsewhere because a trade with this strategy would be invalidated at that time.

With that being said let’s look at our chart and see what happened.

Great, it hit the trend line so why can’t we just go ahead and BUY now since it is an uptrend?

Well if you asked that, good question.

As I said, the market tends to follow these lines, but sometimes it will fake traders out and they will end up losing a lot of money when it breaks the trend.

This happens every single day, which is why it is critical to have a strategy that will help you know if this break may occur.

And we do not want any of that to happen to you, so let’s check out the criteria to enter to help us make a safe entry.

**Rule #5 Price Must hit trend line in between 38.2% and 61.8% lines(fibonacci golden ratio)**

Before I start to explain, look at the chart to see what this exactly means:

The price retraced all the way back and tested the 38.2 mark for quite a while before hitting the trend line and continuing to go to the upside.

Once the price hit our trend line that we drew and we saw that this was in between **38.2-61.8** lines then our trade is one step closer to being triggered.

Why does it have to be in between these lines for this strategy?

We want to capitalize on the big retracements. And the 38.2, 50, 61.8 lines have all been proven to be the best retracement lines to use with the Fibonacci.

Once you find this, look for an entry.

**Rule #6 Entry Point**

So everything is lined up to make a great profit on this retracement, what is the last step to make the trade...

**In a BUY**-In order to make your entry, you will wait for the price to close above either the 38.2% or 50% line.

**In a SELL**-In order to make your entry, you will wait for the price to close below either the 38.2% or 50% line.

Lets Check out the charts to clarify this:

Refer back to this picture when you use this strategy since this basically shows us what our charts will look like before we make a trade.

**Note**** If the Price hit our trend line in between the 50% line and the 61.8% fib line, then we would wait for a candle to close above the **50%** line to enter the trade.

The only reason to wait for a candle to close above the 38.3% fib line was because it is in between the 38.2%-50% lines for this example.

This process should not take very long, as our trend should continue upwards because of the previous support level with the trend line.

In the above example, it illustrates these rules when the trend line meets the price level in these two zones.

**Note**** If the price breaks below the 61.8% fib level in the example, then you will also need to wait for a candle to close above the 50% fib level.

The reason you always wait is because you do not want to get caught in a broken trend and end up getting stopped out.

**Rule #7 Stop Loss Placement**

Your stop loss can vary based on what your charts are showing you. Look in the past for prior resistance or support.

In the example trade, the stop was placed in between the 50% and 61.8% fib line. For this trade, it just made sense.

This is because if it would have broken the 50% fib line then the uptrend would have been invalidated and we want to get out of that BUY trade as quickly as possible.

It is always helpful to look in the past to determine a stop loss

**Conclusion**

You always want to push you winners. If you entered this trade using this strategy here are some of the returns you could have gotten is just a short period of time:

Which is why I would recommend using a 3 to 1 (or even 4 to 1) risk to reward ratio. If you want to see the best strategies that this R:R ratio check out some of these:Supply and demand strategy, Stochastic strategy, Big Three Strategy.

That is always up to you. You need to decide how much you are willing to risk vs. reward.

Some will go for just 20 pips, while others press their winners and usually end up profitable.

I would target a point where there is prior resistance/support or an area where you think the trend will stop.

You could even draw **channels** to help you find a good take profit mark.

Be smart and remember to only risk no more than 2% of your trading account.

I hope you enjoyed this trading strategy and thanks for reading! Tap here to read one of the strategy reports that use the **Bollinger Bands Indicator!**

If you have a question about go ahead and leave a comment below or email us directly at info@tradingstrategyguides.com ** **

Maybe people search for the best Fibonacci trading books, the best Fibonacci trading youtube strategy, Fibonacci trading software, and the best Fibonacci strategy in forex. But really there is nowhere else to search because all those things you can find in this article!

Thanks for reading!

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Hi thanks a lot with such a valuable info, can I have someone to help me understand this strategy better.

You absolutely can. You can email us directly at info@tradingstrategyguides.com and we will offer all the help you need. Thanks!

The diagrams are great, makes it easy to follow/

Well done.

That is our goal Raymond. To try to make Forex trading simple with easy to understand trading strategies. Thank you!

Very good ! Now I know pretty useful about trend line and fibos. Thanks!

Not a problem. They work very well together.

Excellence strategy, i will follow it since i am very interested both trendline and fibos.

Many thanks

Great article and interesting strategy. I'm wondering though the trend line is drawn in on a chart that has already formed. How would you apply this to a chart that is forming? Or is your suggestion that you wait for the bounce before drawing the trend and checking if it meets your strategy.

I had the exact same question. Curious that Trading Strategyguides replies to those around you, but doesn't address this issue.

I understand a lot better now. Looking forward to your explainations on other indicators.Thank you very much.

No problem. We will certainly be developing more strategies in the near future and posting them for you to learn.

Excellent statergy.. Thanks. Can I use this statergy for trading crude oil ?

Yes, this strategy can be used trading crude oil.

Thank you for the strategy. It is working very well.

Great Job!

Thanks to your team for sharing with us!

Thanks for the kind words!

We have not thoroughly tested it with cryptocurrency but this should be a great strategy! Let us know if you do any testing with it