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The MacFibo – A Forex Trading Strategy
There are many strategies that require the complimentary validation of Fibonacci levels.
Forex Traders attempt to utilize them in the most appropriate way so they can be used effectively with a combination with a number of technical indicators.
In this article, we will discuss a Forex strategy, which is widely known among financial traders. It is namely The MacFibo.
Traders have a consensus to suggest implementing this MacFibo strategy whilst trading the EURUSD pair or Gold on the H1 and H4 timeframes.
What do we need to implement for the MacFibo strategy?
Firstly, we must apply the three core moving averages to the chart.
• First simple moving average should have the period equal to 8;
• Second simple moving average with the period equal to 20;
• The third moving average is the exponential moving average with the 5th
At this point, we will implement the Fibonacci levels into our trading strategy.
You can achieve this within the settings:
Here are the levels that we use:
We must apply the adapted Fibonacci levels following these specific rules as set above. I general, they rely on the momentum and direction of the trading market
When should we decide to place a buy?
• The exponential MA should break the SMA with the 20-period from bottom to top.
• The bullish candlestick should have closed higher than the crossover.
• Applying the Fibonacci levels from the high of the candlestick formed after the crossover, to the low of the lowest candlestick within the trend.
• We then open the long position at the opening price of the next candlestick. At the same time, we ensure that this level is not placed at the previous support or resistance zones.
• We place take-profit points at the 161.8 Fibonacci level.
• Our stop-loss is placed at the 38.2 or 78.6 Fibonacci level.
The decision of entry depends on the placement of previous support or resistance levels.
We must consider the example, on the H1 chart of EURUSD. On the 12th April, the exponential moving average (violet) crossed the 20-period SMA (brown) from bottom to top.
We then opened a long position at 1.1287 after the price broke the previous resistance. setting our stop-loss at the price 1.1264 (the 38.2 Fibo level) and our take-profit at price 1.1316 (the 161.8 Fibo level). resulting in a gain of 29 pips.
When do we decide to place a sell?
• When the exponential MA crosses the 20-period SMA upside down.
• The bearish candlestick closes below the crossover.
• We apply Fibo levels from the low of the candlestick formed after the crossover, to the high of the tallest Forex candlestick within the trend.
• We open the short position at the opening price of the following candlestick. simultaneously, we ensure that the level is not placed at the realms of the previous support or resistance zones.
• We place take-profit points at the 161.8 Fibonacci level.
• Our stop-loss point is placed at the 38.2 or 78.6 Fibonacci levels.
The choice varies on the placement of previous support or resistance levels.
looking at the H1 chart of the EURUSD pair, the 5-period EMA (in violet) crosses the 20-period SMA ( in brown) upside down on January 2.
We then proceeded to open a short position at price 1.1420 following the bearish candlestick which occurred below the crossover and below the support.
We then place our stop-loss at 1.1438 (78.6 Fibonacci level).
Our take-profit entry level is placed at 1.1376 (161.8 Fibonacci level). We led us to earn 44 pips.
When do we decide to place a sell?
• When the exponential MA crosses the 20-period SMA upside down.
• The bearish candlestick closes below the crossover.
• We apply Fibo levels from the low of the candlestick formed after the crossover, to the high of the tallest candlestick within the trend.
• We open the short position at the opening price of the following candlestick. simultaneously, we ensure that the level is not placed at the realms of the previous support or resistance zones.
• We place take-profit points at the 161.8 Fibonacci level.
• Our stop-loss point is placed at the 38.2 or 78.6 Fibonacci levels.
The choice varies on the placement of previous support or resistance levels.
looking at the H1 chart of the EURUSD pair, the 5-period EMA (in violet) crosses the 20-period SMA ( in brown) upside down on January 2.
We then proceeded to open a short position at price 1.1420 following the bearish candlestick which occurred below the crossover and below the support.
We then place our stop-loss at 1.1438 (78.6 Fibonacci level).
Our take-profit entry level is placed at 1.1376 (161.8 Fibonacci level). We led us to earn 44 pips.
The MacFibo Forex Strategy additionally provides us the opportunity for scaling up.
If the price moves towards the Fibonacci target of 161.8 and the 5-period exponential Moving Average (EMA) crosses the 8-period simple Moving Average (SMA) from the bottom to the top (a short position entry) or from top to bottom (for a long position entry) and then it crosses back, then this can confirm that the open price of the candlestick after the crossover is the additional market entry point.
If this is the case, we would place our take-profit point at the 261.8 Fibonacci level. Additionally, it would recommend that you trail your stop loss after scaling in with such a move.
As an example, within the same chart, we proceeded to enter the short position at price 1.1706. We added more at 1.1678 when the Exponential Moving Average (violet) crossed the 8-period SMA (orange).
We subsequently moved our take-profit level to price 1.1614 (261.8 Fibonacci level). Equally, we trailed the stop-loss to the 78.6 Fibonacci level at 1.1708.
Conclusion
So we have discovered that no matter how small the adaptations to Fibonacci levels may be, they can be applied to an efficient strategy.