Content Introduction..........................................................................................................................................3 1. Going in the right direction..............................................................................................................5 2. Pivot Points.....................................................................................................................................10 3. Camarilla pivot points....................................................................................................................27 4. Fibonacci trading............................................................................................................................34 Fibonacci trading on higher timeframes........................................................................................51 5. Pivots and Fibonacci.......................................................................................................................65 6. DEMA and Fibonacci.....................................................................................................................79 Using Dema indicator....................................................................................................................88 7. Ichimoku Kinko Hyo......................................................................................................................91 8. Ichimoku and Fibonacci...............................................................................................................101 Using Ichimoku Kinko Hyo Monitor...........................................................................................107 9. GMMA.........................................................................................................................................112 10. Renko..........................................................................................................................................116 11. ATR Trailing Stop Loss..............................................................................................................137 What is next?....................................................................................................................................148 Introduction Let’s clear one thing up. You won’t find here complete system which you can follow blindly and make money. It is not because I am hiding some holy grail. Very important part of every trading system is money and position management. Without that, you are lost. On chart, in my opinion, it looks like below: I have experience with automated trading. There are profitable systems, which you can buy for hundreds or thousands of dollars or build one by yourself. Yes, some of them are profitable now, but markets changes. These systems are synchronized with a current market. Later you end up with a system which is desynchronized (because markets changed) and simply losing money. This is not the way. The correct way is to select tools and master them. Then you need to get a solid capital so you can use your trading tools. Last but not least, you have to set rules how you manage your money during and after a trade - you want to stay in the game and not lose everything in few weeks. About author My name is Simon. I live in Eastern Europe. I worked as a programmer. I got interested in trading 10 3 years ago. I started to trade stocks and I got hooked. Around the year 2008 I've read about Forex. I opened a small trading account. It was so much harder to trade Forex than stocks. And I blew this small account because I used too big leverage. I got back to stocks, but the crisis started and it was hard to sell stocks. Long story short, I gave Forex another try. This time, I was more careful. I was reading about Forex, asking traders for advice. First years were hard. Sometimes I was profitable, but later I was losing money again. It changed when I learned about Fibonacci, trailing stop and other techniques. Thanks to Forex I started to make money. Not millions, because it is hard to earn here fast. Still, I was able to earn pretty good money. When my father got really sick and treatment was very expensive, I was able to help him financially. It was a good feeling. Without my profits from Forex, I would not be able to help him. It was a long way for me to learn how to trade Forex. I think that now I can tell you what works well, and what is overrated. That is why I wrote this guide. Goal of this publication The goal of this publication is to show you various trading tools and strategies so you can select the best tools for you and build your own trading strategy. I believe that too many people try to build a strategy based on moving averages and oscillators. It is an easy way to fail. Do not get me wrong - I use them too, but professionals use also Fibonacci, Pivots and they are ahead of rest. I show you how I use these tools and give you some example trades (some are real, some are made up because I tried to show different examples). In the end, you have to take what you liked most, test it and build your own trading system. How to read this book Each section about strategy has shorter or longer introduction about current strategy/tool. Later I show you examples how you can use this strategy in practice. Do not scroll the book. Read through examples, examine charts. I tried to select different situations to show you how to react when they occur. 4 1. Going in the right direction The biggest problem with Fibonacci trading system (and any other system) is that sometimes it is hard to choose the right direction. You will be at a situation when ABC Fibo pattern fit in both directions. So should you go long or short? Of course, we will never be 100% right, but the main goal is to be right that 60 to 70 or more percent. Still, it should be a decision based on the system, not on a guess (even a lucky one). There are few ways you can increase your odds. In this chapter, you will learn what works. I cover topics like: • how to work on few time frames • which most important averages should you watch • how to use DEMA • how to use my custom DEMA indicator as a help • how to use Ichimoku • how to use Ichimoku indicator as a help How to work with few time frames The first thing you can do to decide about trade direction is to check the situation on higher time frames. This is not a new concept. Alexander Elder in his book Trading for a living form 90's wrote about three window time frames. So to make a trade on a daily chart you also looked at the situation on weekly and monthly. Of course, when you trade Forex or e-minis, there are more time frames, but you can modify this approach. I believe that trading based on few time frames is the foundation of your success in trading. First step: you have to decide on which time frame you trade and make decisions. Sounds obvious, but I can remember many times when I was trading on 5m, but I checked 15m and saw some signal and place an order based on that time frame. If you are trading on a 5m, then you care mostly about 15m, 30m, 1h and eventually 4h. Daily, weekly or monthly are only to check some long term support/resistance levels. If you are trading on a 1h, then you care mostly about 4h, daily and eventually weekly. 5 Second step: check higher time frames Checklist for higher time frames is as follow: • What is a relation of price to the 100 and 200 SMAs on higher time frames? • Where are support/resistance lines? • Are there important pivot points I should look at? First, why 100 and 200 SMAs? In most cases I will pay most attention to the 100 SMA. The reason for that is simple. 100 SMA is closer to the price and price reacts more often with 100 SMA than with 200 SMA. By reacts I mean that average will work as support/resistance. In a strong downtrend, line in the example below, 100 SMA is nearer: Image 1.1. Price and distance between 100 SMA and 200 SMA You can see that 200 SMA is much higher in the example above. 6 What to look for? OK, so before opening a trade you should check higher time frames to see if there is an SMA nearby. Main reason: You want to make sure that trend on higher time frames is in the same direction you plan to open a trade. On this 15m chart you can spot an ABC pattern: Image 1.2. Mixed situation on chart, no clear trend Pirce is trapped between 100 and 200 SMA. Looks like a candidate to go short, but based on this time frame I am unable to say if the main trend is up or down or if there are no important support/resistance nearby. That is why you check higher time frames. If a price on higher time frames is above 100 and 200 SMA (like below) I pass. 1-hour timeframe: 7 Image 1.3. Higher time frame and indication of an uptrend If a price is below 100 and 200 averages, that means that bears are in charge and I am more likely to take a risk. 1-hour timeframe: Image 1.4. higher time frame and confirmation of a downtrend I do not check if there was a cross of 100 and 200 or other averages. I simply check where is a price in relation to the averages and if 100 is above 200 or below. Where are support/resistance lines? Higher timeframes let you see easier where important highs and lows are. You also look for triangles, 8 flags, channels and other symmetry on the chart. If you were long on GBPUSD based on lower timeframe you know that 1.45-1.46 is a take profit area based on that weekly chart: Image 1.5. Checking for important levels to select exit points I simply draw the most important lines and then I switch to the lower time frames to make a trading decision. Are there important pivot points I should look at? You should be aware where are daily, weekly and monthly pivot points. When you are daytrading (plan to close trade) on low time frames (1m, 5m, 15m) then you mostly check daily pivot lines. When you trade on 15m or higher and plan to swing trade then you should check the situation at weekly and monthly. If a price is above the pivot, then it is possible that trend is up. If is below, the situation is bearish. You should also check if pivot lines do not corellate with Fibonacci lines. You will see more of that in the trading example section. Using DEMA and Ichimoku indicators as a help In next chapters, you will see how to combine Fibonacci with other tools. There is also a section about Fibonacci + DEMA and Fibonacci + Ichimoku. I created DEMA indicator which will show you situation at all time frames. I also use Ichimoku indicator which will show you similar information. You can read more about these indicators in next chapters. 9 2. Pivot Points You can build very good strategy around pivot points. Thanks to them, you are trading with tools used on trading floors. We have few types of pivot points: • daily • weekly • monthly • and others, based on time frame Lines comes from mathematic formula which is based on data from previous period. So daily pivot points are based on previous day, weekly are based on previous week etc. If you are interested in the mathematic formula, you can easily search in online. I do not want to go to much into details here. We have in a result few lines: • pivot line – this is a line in a middle • below pivot, we have S1, S2, S3... support lines • above pivot, we have R1, R2, R3... resistance lines When price is going down, it is possible that it will find support at one of S lines. In most cases it will be S1 or S2. When price is going up, it is possible that it will stop at one of R lines - most often R1 or R2. Thanks to that we have knowledge about possible support and resistance lines. When a trading day starts, I check position of price: is it above pivot line or below? When a price is above pivot line, then pivot line should act as support and it is possible that price will go up. Pivot is a central line so the price will often return to its pivot. When it does, you check how it reacts against pivot. Let's say that price starts day 14 pips above pivot line. It is in a range move, but eventually moved down toward pivot line. We expect price to find some support here. Pivot holds and we saw a move up. We got signal from oscillator to go long and we opened position. R1 and R2 are our targets. If pivot fails as support then we may expect a move lower to the S1 or S2 line. It is good to combine this with a signal. It may be a cross of two averages, a signal from oscillator, from price action or other. Let's move to the examples and check how it works in practice. 10