How to Use Fibonacci Analysis to Make Trading Profits

Jan 15, 2020

Vijay Bhambwani, Editor, Fast Profits Daily


This is Vijay back with you again in Fast Profits Daily.

First, I would like to thank you for all the kind feedback you sent me for last week's Fibonacci trading video.

In that video, I covered only the very basics.

Today, I'll go deeper.

I hope you find the video useful.

Hi, this is Vijay Bhambwani and I'm back again this time, extremely happy because of all the feedback that I got from you about my video on Fibonacci Analysis while trading.

Keep your feedback coming in guys. When you don't talk back to me, I feel like I'm talking to a brick wall.

So I'm gonna take up where I left from in my previous video on Fibonacci trading. In the last video, we talked about extremely basic entry level stuff about how you have to take 38.2, 23.7, 50%, 61.8% Fibonacci retracements and how, since the markets have become faster, waiting only for the golden mean did not make sense.

There are, however, other aspects to Fibonacci trading. Rank and file traders think that the Fibonacci ruler must begin at the extreme low point of the swing low, span the ruler all the way up to the highest point of the swing high, and then measure the retracement level.

Is that really right? The answer is yes and no.

Depending on how a majority of the people are placing the ruler and placing their bets accordingly, the prices might react so.

But there are many a times, the market does not really bottom out or top out in one clean V or an inverted V fashion.

If this is a bottom, the market might just come multiple times at this support and then finally take off.

There are times when the bottom could be slightly lower, a successive bottom could be slightly lower.

There are times when the final bottom, before the rally takes off, could be slightly higher.

What is the most precise point to start your Fibonacci ruler from point zero going all the way up to point 100?

Logic tells you and here behavioural science comes into the picture, behavioural science tells you that traders are most interested and are likely to remain their most recent trade as an anchor point.

This is in behavioural analysis called the recency bias. The entry level, which you took at the most reason point and especially from where your trade is still alive, will be what you're concerned with.

So I would suggest you first take a Fibonacci ruler starting from the most recent low rather than the absolute low, and then plot it all the way to the top. See if this Fibonacci ruler of 23.7, 38.2, 50%, and 61.8% has been respected by the markets as a support and resistance multiple times.

This is something we traders called eyeball testing. By seeing at chart, you will see how many times the market has respected or violated those particular levels, and then plot another Fibonacci ruler from the extreme low to the extreme high, and see which one of these two rulers is the market actually acting as a better or more robust support and resistance.

More often than not, in a rational market, and especially on extremely short-term charts of one minute or lower, I have found that the Fibonacci ruler works better when you take the most recent low rather than the absolute deep low.

The other aspect that needs to be taken into account before placing your trades on Fibonacci style analysis, is how do you account for the gap in the prices? More often than not, many a times, the price opens with a gap up or gap down. Now how do you account for this window or a vacuum in the price?

Here again, it depends on what the majority of people are doing and therefore acting accordingly.

Technically speaking, if it all there is a Rs 10 gap in the price, you should not take the Fibonacci ruler from the absolute bottom to the absolute top but Rs 10 below the top, so as to adjust for the Rs 10 gap where no trade has taken place but it was sentiment that resulted in this open window.

Here again, you might want to resort to eyeball testing because just because you know this little secret that I'm sharing with you now, does not mean that everybody knows this secret, alright?

So maybe the others are going with the same old plain vanila Fibonacci analysis and let's not forget what we discussed in the last video on Fibonacci, it can be to a certain degree, sometimes a self-fulfilling prophecy.

Fibonacci works because a lot of people are depending on it and placing their bets accordingly, and therefore, their trades are impacting the price.

So is Fibonacci working because traders are placing their bets according to Fibonacci levels and impacting the price or is the price getting impacted because Fibonacci works?

It's like what came first, the chicken and the egg theory, right? Let's not even get into it.

What we need is the kind of study either from the absolute bottom or to the recent bottom, all the way up to the top, and then account for that Rs 10 gap in the price by placing the ruler Rs 10 below the absolute top or placing it all the way to the top and seeing which level is the market and the price respecting more.

You go with the flow and don't fight the flow. That's the way a smart trader makes money.

I'm gonna share with you some more cutting-edge secrets on Fibonacci trading. Do bear with me and do not forget to click like on this video. Don't forget to share this video with family and friends.

And in the comments section, do let me know how you liked this video. Of course, I'm coming with more Fibonacci stuff a little more advance than this one and the previous one.

Also, do not forget to subscribe to my YouTube channel and guys, I am also looking forward to seeing you on my Instant Income Summit on 21st of Jan, Tuesday, at five PM, which is absolutely free, where I'm gonna share with you my new idea, something that's revolutionary and exciting.

I'm very excited about seeing you so do join me there. This is Vijay Bhambwani signing off for now.

Do take very good care of your trades and investments.

I'll be back again tomorrow in the Fast Profits Daily.

Also, don't forget to join me on Tuesday, 21 January, at 5 pm, for my Instant Income Summit.

I'm very excited about this summit and I hope to see you there.

Registration is free. You can sign up here.

Warm regards,

Vijay L Bhambwani
Vijay L Bhambwani
Editor, Fast Profits Daily
Equitymaster Agora Research Private Limited (Research Analyst)

PS: Join me on Tuesday, 21 January, for my Instant Income Summit. I'll share my strategy (which I've kept secret until now) to make tens of thousands of rupees in income within minutes. This online summit is free to attend. Please register here. I look forward to seeing you there.

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2 Responses to "How to Use Fibonacci Analysis to Make Trading Profits"

Babubhai r

Feb 27, 2021

Fibbonaki analyses



Jan 17, 2020

Classic teaching sir.. Lucid n power packed trading edge info.. How do I access video 1 on Fibbo?

Equitymaster requests your view! Post a comment on "How to Use Fibonacci Analysis to Make Trading Profits". Click here!