Fibonacci numbers are an infinite sequence and can be used well in the Counter Trend strategy. A Fibonacci number is calculated by adding the two previous numbers. The sequence starts with 0 and 1. All following numbers result automatically: 2, 3, 5, 8, 13 and so on. Fibonacci numbers and ratios often occur in nature; their application in technical analysis transfers this to the financial markets as well. Fibonacci retracements - in the sense of retracements or corrections - are determined by first looking for two extreme points in the chart, a low and a high. This distance corresponds to 100 percent of the movement. From this, the retracements are different correction levels, such as 38.2, 50 or 61.8 percent. These values are obtained from the formation of various quotients in the Fibonacci number sequence.

Entering the market

The basic idea remains simple, namely to enter at the end of the counter-trend in order to be back in the expected dynamic trend movement. But where to expect the counter trend to end and at what point will the actual trend resume?
For aggressive market participants, the counter trend strategy offers an entry on the underside of the falling trend channel. Especially when this coincides with support levels from Fibonacci or former intermediate highs or lows. Especially when several marks coincide in a narrow space, the chance of a reversal is high. A good example continues to be the combination with reversal patterns of candlestick analysis, which leads to an overall better probability of winning trades. So if a Hammer, Bullish Engulfing, Bullish Harami or other reversal pattern appears in the area of the supports, this is a possible starting shot for a well-timed long position at the beginning of a renewed upward movement.

In practice, this then looks like the picture above, for example. Here, the A-B-C correction ended after the upward push with point C at the Fibonacci cluster.
This consisted of the following supporting components:

•     61.8 percent retracement
•     107.2 percent extension
•     100 percent projection
•     Candlestick pattern Hammer
•     Rising Oscillator

All signals occurred in the same zone. Then when the price rose above the high of the hammer,a long position was opened. Friends of indicators can look at said point alternatively to the use of an oscillator for divergences, for example, in the MACD, or else for reversal situations in the Stochastic or the RSI. These would also indicate the probable end of the countermovement and thus the resumption of the trend. Other indicators of similar design can also be used here.

Profit protection and profit targets

The stop to limit losses for this trade should be appropriately below the reversal formation or below the cluster - that is, below the accumulation from the various support levels, whichever is lower. This makes strategic sense so that the position is not accidentally stopped out right away, only to see the market run in the right direction afterwards. The price target of the trade is in trend direction at least above the last high. Finally, it is expected that the trend should actually continue, and ideally even significantly above the previous high. Thus, the profit/loss ratio for this trading idea is attractive in any case.
An interesting alternative for traders is to work with multiple profit targets in the Counter Trend strategy. The first target in exness Asia login personal area would then be the level of the top of the falling trend channel, with the stop being drawn to the entry price of the trade when this level is reached for the remaining position. This would take the famous cow off the ice and virtually ensure a profit. Further down the line, one could repeat this game at notable resistance levels and let the remainder of the original position continue to run. This allows the trader to participate in a longer resumption of the trend and a possible acceleration to the upside.

Another variation

Another play would be to extend the position again on the break of the upper side of the trend channel, if no negative factors for the trading idea have arisen by then. The reason for this action is that such a break to the upside is considered by many market participants as a confirmation that the previous correction is likely to be completed and the main trend has resumed. And this could lead to the further dynamic upward movement.