Another funded forex trader joins the portfolio manager armada. Lukas uses a lovely assortment of technical analysis alongside fundamental events to help determine his trades. (If you want to try our funded trader program, click here)
As we have stated in many articles before, different traders have different preferences. In our funded forex trader’s case, it is an 80-20 split of technical and fundamentals.
We previously went through another funded trader’s strategy who used similar tools in our price action article. However, what stands out to me with Lukas’ interview is he mentions the usage of Fibonacci tools.
As many of you would have noticed, or heard, Fibonacci does not come with just the retracement and extensions, it also comes with arcs, time zones, trend lines and lots of interesting tools.
Similar to the Ichimoku article, I will only present a high level overview on some of the Fibonacci options because Fibonacci itself could be a course.
Why is Fibonacci so popular anyway?
Apart from support and resistance (supply and demand nowadays too), and moving averages, the Fibonacci is probably thee most popular indicator out there. The notion is it appears everywhere in nature.
In trading, the application is different. It is quite literally price projection.
Common Fibonacci tools:
Fibonacci retracement: trades pick two points and expect price to retrace between the zones projected. The 382, 50 and 682 are most used.
The Fibonacci extension: as above, but a third point is plotted, where traders expect those exact two points to be projected from the third point to create target points… hence the name extension; 1.61 and 1.5 points are commonly used.
Now we will venture into the world of uncommonly used Fibonacci tools:
One common trend, they all involve drawing a line from point a to point b:
Fibonacci trend lines/fan: this is to find areas where a trend is expected to weaken.
Fibonacci arc: this is used to find potential areas of support and resistance.
Does it end here?
Yes and no, it does not end here. As I stated, I could write volumes if I went into the application of Fibonacci into trading. However, it is also embedded into other forms of trading. For instance, some Pivot Points are calculated using Fibonacci numbers, and the same applies to moving averages.
Some traders even cluster the Fibonacci tools, what this means is that they will draw multiple points As and Bs to find Fibonacci based support and resistance zones.
Should you include Fibonacci in your funded trading?
If you back test it and decide it adds value, then by all means. However, if you think adding dozens of indicators will add more technical confluence, as we have written before, you will be in for a rude awakening.
The Fibonacci is a tool, not a silver bullet to the markets. Ultimately you need to decide whether you would like to add it to your trading toolbox or not.
If you are unsure, then please feel free to reach out to the team or for a more tailored experience consider the HPT Mentoring, or if you want to really dig deep into this stuff then consider joining our Mastermind!
Without further ado, here is Lukas’ interview: