Markets often retrace a portion of a prior move before resuming trend. This strategy identifies recent swing highs and lows and watches for price to test the 61.8% or 78.6% retracement levels. These areas frequently mark exhaustion points.
The algorithm tracks swings over a rolling window and calculates Fibonacci levels between them. When price nears a key retracement and forms a candle in the direction of the original trend, a trade is opened with a stop placed a set percent away. Targets are around the 50% midpoint of the swing.
By focusing on deep pullbacks within an existing trend, the method aims to capture the early stages of a continuation move after sellers or buyers have briefly taken control.
- Entry Criteria: Price tests 61.8% or 78.6% retracement and prints a confirming candle.
- Long/Short: Both depending on trend.
- Exit Criteria: Price reaching the 50% level or stop-loss.
- Stops: Yes, percentage based.
- Default Values:
- SwingLookbackPeriod = 20
- FibLevelBuffer = 0.5
- CandleType = 5 minute
- StopLossPercent = 2
- Filters:
- Category: Trend following
- Direction: Both
- Indicators: Fibonacci levels
- Stops: Yes
- Complexity: Advanced
- Timeframe: Intraday
- Seasonality: No
- Neural networks: No
- Divergence: No
- Risk level: Medium