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02 - Class 02 - Focusing The Grid

This document discusses techniques for focusing the Fibonacci grid to analyze financial market trends and identify support and resistance levels. It covers establishing price ranges using Fibonacci ratios from right to left, accounting for market cycles that can be symmetrical, expanding, or contracting, and identifying "confluence zones" where multiple Fibonacci ratios appear in a tight cluster. Analyzing expanding and contracting markets and finding areas of confluence are emphasized as ways to improve the accuracy of the Fibonacci grid in changing market conditions. Homework involves practicing these techniques on historical market data.

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uday
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176 views

02 - Class 02 - Focusing The Grid

This document discusses techniques for focusing the Fibonacci grid to analyze financial market trends and identify support and resistance levels. It covers establishing price ranges using Fibonacci ratios from right to left, accounting for market cycles that can be symmetrical, expanding, or contracting, and identifying "confluence zones" where multiple Fibonacci ratios appear in a tight cluster. Analyzing expanding and contracting markets and finding areas of confluence are emphasized as ways to improve the accuracy of the Fibonacci grid in changing market conditions. Homework involves practicing these techniques on historical market data.

Uploaded by

uday
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 7

TOTAL FIBONACCI TRADING

PAGE 1 OF 7

Class II: Focusing the Grid


Review of Lesson 1
• How Fibs puts money in our pocket
• Establish Support and Resistance to identify measurable swing ranges.
• Rules for measuring ranges using Fibonacci ratios.

Rules for establishing ranges:


• ALWAYS work from right to left.
• Use internal data to help bring the grid into focus.
• When possible, place gaps at the 50% ratio.
• Take note of significant moves and place at either the
beginning or middle (50%) of the range.
• Candle wicks may need to be excluded.
(Example: A shooting star wick is often truncated.)
• Often the secondary move in a new range is more accurate
than the initial break.
• Think of ranges like a sentence…locate the punctuation!

Two Common Mistakes:


I. Amateur traders remain fixated on the extreme highs and lows.
➡ Begin and end the range at prices where strong buying or selling
pressure is observed.
➡ Often the secondary swing after the actual turn offers greater value.
II. Beginners often fail to compensate for expanding and contracting market conditions.
➡ Using the techniques to “focus the grid” in today’s lesson will minimize the impact of
changing market cycles.

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CLASS II: FOCUSING THE GRID
TOTAL FIBONACCI TRADING

PAGE 2 OF 7

Focusing the Grid


Market Cycles
There are three cycles in every market:
• Symmetry
• Expansion
• Contraction

Market Cycles: Symmetry


• When analyzing waves in a symmetrical market, price movements remain constrained to
our raw fibonacci ratios.
• Use the “Fib Extension” tool.
• Ratios:
➡ 0.382, 0.50, 0.618
➡ 1.00, 1.382, 1.618

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CLASS II: FOCUSING THE GRID
TOTAL FIBONACCI TRADING

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In an up-trend:
➡ Select your initial point from a previous swing high. (1)
➡ Complete your range at the bottom of the subsequent
retracement. (2)
➡ Select your third point from a new swing high. (3)
➡ Measure potential Fibonacci ratios. (4)

In a down-trend:
• Select your initial point from a previous swing low. (1)
• Complete your range at the top of the subsequent
retracement. (2)
• Select your third point from a new swing low. (3)
• Measure potential Fibonacci ratios. (4)

is
arket
I f a m al, the grid
symmetric be extended
can often t few waves!
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for the ne

Advantages of Symmetry analysis:


• Quick and easy -- immediate analysis
• Because of its speed, some traders like it for intraday trades on faster markets like Forex.

Disadvantages of Symmetry analysis:


• Only works in a symmetrical market
• Least reliable of all Support and Resistance methods

Notes

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CLASS II: FOCUSING THE GRID
TOTAL FIBONACCI TRADING

PAGE 4 OF 7

Market Cycles
• Failure to compensate for market cycles will result in a faulty grid.
• This is one of the most common mistakes made by beginning traders.
• If your analysis fails to line up with the price movements, check to be
sure you have properly accounted for the current market cycle.

Market Cycles: Expand/Contract


• Symmetry is only 1/3 of the number of ways a market can behave. In Notes
practice it occurs much less than 33% of the time.
• Typically markets will be in either a mode of expansion or contraction.
• The educated trader recognizes the cycle and adapts his/her trading plan
accordingly.
• To discover if a cycle is expanding:
➡ Draw an initial range starting at the strongest part of the overall move.
➡ Using consecutively larger high/low swings, draw additional ranges and
measure the 50% ratio.
➡ Remember your rules for drawing ranges.
➡ In an up-trend, if the 50% ratios are consecutively higher, the market is
expanding.






➡ In a down-trend, if the 50% ratios are consecutively lower, the market
is expanding

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CLASS II: FOCUSING THE GRID
TOTAL FIBONACCI TRADING

PAGE 5 OF 7

To discover if a cycle is contracting:


• In an up-trend, if the 50% ratios are consecutively
lower, the market is contracting.

• In a down-trend, if the 50% ratios are consecutively


higher, the market is contracting.

Up-Trend Down-Trend

Expanding 50% Ratios Higher 50% Ratios Lower

Contracting 50% Ratios Lower 50% Ratios Higher

How does this put money in my pocket?


• When a market is expanding or contracting, assume your simple fibonacci grid will be out
of focus. Entries and exits should be conservative.
• Develop analysis that adapts to these changing market conditions.

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CLASS II: FOCUSING THE GRID
TOTAL FIBONACCI TRADING

PAGE 6 OF 7

Confluence I f yo u
Identify Confluence Zones m e a s u fi n d y o u r
r se
• A confluence zone is a group of Fibonacci ratios in a tight cluster. ranges i n g t o o m l f
,t a
• To establish zones of confluence, draw multiple ranges beginning with l o n g e r ry looking ny
the same point of origin and ending on relevant swings. a t
spot si t i m e f r a m e a
• Note the ratio clusters and delete your Fib lines. gnifica t o
nt mov
• Confluence literally brings the grid into focus and gives you es.
confidence in the ranges you selected.

Identify Confluence Zones (continued)


• Confluence zones offer two important perspectives:
➡ Potential trade entries based upon a retracement
➡ Gauging the lifespan of a current trend
• If there is a lack of confluence to offer support or resistance in a retracement, prepare for
a potentially large trend reversal.
• Notice the lack of confluence zones below 10,898 and the free fall that resulted.
• A confluence zone acting as support does not become resistance. Once the zone is
broken, it is no longer a target. This is also true for zones acting as resistance.

OR

• Be sure all ranges begin with the same price and adhere to the rules of range drawing.
• A lack of any confluence means you need to reanalyze your choice in ranges.

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CLASS II: FOCUSING THE GRID
TOTAL FIBONACCI TRADING

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Homework
• Using historical data, work to find an example of both an expanding and
contracting market in both an up-trend and a down-trend (four total).
• Set up and practice using your Fib-Extension tool by drawing 5
retracements that resulted in a respect of the fibonacci ratios in a
symmetrical market. (Hint: Use smaller timeframes)
• Work with your range drawing to find a minimum of 5 confluence zones
that were respected.

Next Lesson
• Establishing Price Targets
• Fibonacci Expansions
• Projections of Confluence

PAGE 7 OF 7

CLASS II: FOCUSING THE GRID

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