A profitable Fibonacci strategy involves drawing custom retracement lines and waiting for a bearish engulfing candle for profit. Details can be found on the creator’s channel.

Introduction

Trading in the financial market requires a lot of skills and sound knowledge about different strategies. Among the many trading strategies in the market, Fibonacci-based strategies are quite popular among traders. These techniques are based on the Fibonacci sequence, which is a series of numbers where each number is the sum of the two preceding numbers. In this article, we will discuss one of the simple and profitable Fibonacci strategies that traders can use to make profits in the market.

Fibonacci Retracement

The Fibonacci retracement is one of the most basic tools in the Fibonacci strategy. It helps traders identify support and resistance levels in the market. The tool uses horizontal lines to indicate where possible levels of support or resistance may occur. To draw the retracement, traders have to select two points on the chart, typically the high and low of a trend, and drag the tool to the opposite side of the trend. The tool will then automatically draw the horizontal lines at the Fibonacci retracement levels, which are 23.6%, 38.2%, 50%, 61.8%, and 100%.

Bearish Engulfing Candlestick

The next step in this strategy is to look for a bearish engulfing candlestick. The bearish engulfing pattern is a two-candlestick pattern that occurs when a small bullish candle is followed by a larger bearish candle, which completely engulfs the previous candle. This pattern indicates a bearish reversal in the market.

Trading the Fibonacci Strategy

In this strategy, traders wait for a bearish engulfing candlestick to appear on the chart, indicating a possible reversal in the market. Once the candlestick pattern is confirmed, traders can enter a short position at the 50% or 61.8% Fibonacci retracement level. These levels are significant because they often act as strong support or resistance levels. When the price pulls back to these levels, there is a high chance that it will reverse direction.

To enter a short position, traders can use stop-loss orders to protect their trades in case the market goes against them. The stop-loss order can be placed above the high of the bearish engulfing candlestick or the 61.8% Fibonacci retracement level. The profit target can be set at the next significant support level, which could be the 23.6% or 38.2% Fibonacci retracement level. Traders can also use trailing stop-loss orders to lock in profits as the price moves in their favor.

Conclusion

The Fibonacci retracement and bearish engulfing candlestick pattern are simple yet effective tools that traders can use to make profits in the financial market. Combining these tools in a trading strategy can increase the probability of success, as traders can identify potential levels of support and resistance and take advantage of market reversals. However, traders should also be aware of the risks involved in trading and manage their positions properly to maximize profits and minimize losses. More details and examples of this strategy can be found on my channel.