
In this article, we will discuss what the shooting star pattern is, how to recognize it, and how you can use it in your trading. Let’s get started!
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2020-03-25 • Updated
Information is not investment advice
There are a lot of strategies, which require the usage of Fibonacci levels. Traders try to adapt them in the best way so they can be used effectively in a combination with other technical tools. Today we are going to discuss a strategy, which is widely known among traders. It is called MacFibo.
Traders recommend implementing this strategy while trading the EUR/USD pair and gold on the H1 and H4 timeframes.
What do we need for the following strategy?
At first, we need to apply three moving averages to the chart.
Secondly, we adopt the Fibonacci levels to our trading strategy. You can do it in the settings:
Here are the levels that we use:
We need to implement the adapted Fibo levels following the special rules. Generally speaking, they depend on the direction of trading.
When should we buy?
Let’s consider the example on the H1 chart of EUR/USD. On April 12, the exponential moving average (violet) crossed the 20-period SMA (brown) from bottom to top. We opened a long position at 1.1287 after the price broke the previous resistance. We placed our stop loss at 1.1264 (38.2 Fibo level) and take profit at 1.1316 (161.8 Fibo level). As a result, we earned 29 pips.
When should we sell?
On the H1 of EUR/USD, the 5-period EMA (violet) crossed the 20-period SMA (brown) upside down on January 2. We opened a short position at 1.1420 after the bearish candlestick occurred below the crossover below the support. We place our stop loss at 1.1438 (78.6 Fibo level). Our take profit level is placed at 1.1376 (161.8 Fibo level). We earned 44 pips.
This kind of strategy also provides us an opportunity for scaling in. If the price is moving towards the Fibo target at 161.8 and the 5-period exponential MA crosses the 8-period simple MA from bottom to top (for a short position) or from top to bottom (for a long position) and then crosses it back, the open price of the candlestick after the crossover is the additional entry point. In that case, we place our take profit at the 261.8 Fibo level. Also, it is recommended to trail your stop loss after scaling in.
For example, on the same chart, we entered the short position at 1.1706. We added more at 1.1678 when the exponential MA (violet) crossed the 8-period SMA (orange). We moved our level of take profit to 1.1614 (261.8 Fibo level). At the same time, we trailed the stop loss to the 78.6 Fibo level at 1.1708.
Conclusion
Today we’ve considered how small adaptations to Fibonacci levels may be applied to an efficient strategy. We recommend you to practice it on our Demo account before taking the full advantage out of it.
In this article, we will discuss what the shooting star pattern is, how to recognize it, and how you can use it in your trading. Let’s get started!
What do we do when the price enters uncharted territory with no previous lows or highs to serve as support and resistance levels? Here is your guide into the unknown.
Let us find out what are the basic elements of price action and what you need to master to trade this system.
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