The Fibo Trap strategy is a reverse strategy.
The goal is to identify the end of the correction, entering immediately when a new trend begins.
This strategy is suited for time-frames of 15 minutes and up. With the bigger the time-frame, the higher the level of precision.
The strategy is suitable for all currency pairs, commodities, indices, stocks and futures contracts.
Indicators used for the strategy is Fibonacci, Relative Strength Index and Stochastic Oscillator
Buy Signal of Fibo Trap Strategy
A preliminary buy signal is received when the following three conditions are met.
- The rate is correcting a previous trend in the downwards direction.
- A candlestick appears with goes below the 61.8% of Fibonacci level, but then reverses and closes above that level.
- The Stochastic Index signals a buy by the crossing of its averages, but is still under the 50 line.
Sell Signal of Fibo Trap Strategy
A preliminary sell signal is received when the following three conditions have been met.
- The rate is correcting a previous trend in an upwards direction.
- A candlestick appears which goes above the 61.8% Fibonacci level, but then reverses and closes below that level.
- The stochastic index signals a sell by crossing of its averages, but is still over the 50 line.
The Timing of Entering Trades
Enter the trade after a new candlestick is open following the candlestick that triggered the signal.
The positional will be realized using the RSI indicator.
- In a long position, the position will be realized when a candlestick closes where RSI is in the overbought area, that is above 70.
- In a short position, the position will be realized when a candlestick closes where RSI is in the oversold area, that is below 30.
- The Stop Loss should be set 5 pips from the signalling candlestick.