The Fibonacci trading strategy is one of the most efficient ways to find the best trade signals in the market. It allows the retail traders to execute the trades in favor of the trend and helps them to make wise decisions at trading. If you want to succeed in the retail trading industry, you must learn to execute the trades with a high level of accuracy. And taking the trades with the key trend is by far the most efficient way to make regular profit in this market.
In this post, we are going to share some key guidelines which will help you to master the art of Fibonacci trading strategy. If you follow the key steps stated in this content, you should be able to use this system like a pro trader.
Selecting The Currency Pairs
Before you start to trade with the Fibonacci trading strategy, you should learn to select the currency pairs. Unless you select the right currency pairs, you will never find the critical retracement levels with accuracy. Take your time and learn about the price moments in the major currency pairs. Try to select the minor and cross currency pairs in the trading process as it will make things really difficult and force you to lose money most of the time.
Drawing The Retracement Levels
The retail traders always try to draw the retracement levels in the lower time frame. But if the retracement levels are drawn in the lower time frame, those levels are not going to work properly. For instance, you might draw the bullish retracement levels in the 5-minute chart. But if you move to the daily chart, you will see the trend is bearish. So, taking the short trades at the bullish retracement levels is going to a major mistake. Try to rely on the higher time frame trade signals and execute the trades with strong confidence.
Using The Price Action Trading Strategy
Instead of taking the trades at the retracement level in a random way, you should be using the price action confirmation signals. The majority of the elite traders in CFD trading uses this trading method as it allows them to execute the trades with a high level of accuracy. It might take a while to get used to the price action trading method but once you know the basic patterns of the candlestick, you should be able to execute the trades with much more confidence. Never think you know everything about this market. Take your time and learn to evaluate the signal candlestick patterns. Once you become comfortable with this, focus on the complex pattern.
Risk To Reward Ratio
Setting up the risk to reward ratio is not a complex task. Usually, the trade signals provide a 1:5+ risk to reward ratio. Sadly, novice traders close their trades too early and lose a big portion of the profit. If you kill the risk to reward ratio factors in each trade, you will never learn to recover the losses. Most importantly, you will ruin the efficiency of the trading system. The purpose of this trading strategy is to ride the trend. So, give your trend some time so that it can reach your profit target. Have strong confidence in this system and let the market do its work once you have opened the trades.
Never Over Trade
After learning the Fibonacci trading strategy, the rookies often start overtrading the CFD market. Overtrading is not going to make you rich rather it will drag you down in the investment world. If you want to trade this market with strong confidence and keep the risk factor low, you should focus on quality trade executions only. Try to maintain a trading routine so that you can make wise decisions and make regular profits even at the complex state of the market. And revise your trading strategy once every two months. By doing so, you can keep yourself tuned to the changes in this market.
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