Fibonacci trading strategies with reversal candlesticks is the combining of Fibonacci retracements with reversal candlesticks. If you are practicing trade for a long time then you will find that sometimes prices have a great ability to accurately reverse at or near the Fibonacci level.

As per our opinion, it is better to execute trades using only Fibonacci levels along with the use the reversal candlestick for confirmation. The Fibonacci retracement tool works best in a trending market.

Timeframes : 15mins and above would be better.

Instrument : You can use this strategy for any instruments

Indicators : Fibonacci retracement tool

Trading Rules :

 Long Entry:

• Market must move be in a clear uptrend and then it will start to fall back down eventually.
• Make use of the Fibonacci tool and click and drag at the start of the trend to the level where trend has started to reverse back down and that would give you the fib retracement levels to watch for.
• The Fibonacci levels to be used are 38.2, 50 and 61.8. Now just wait to see if price reverses down to any of these levels and if it does so you move to the next step below.
• Then keep a watch to see if a bullish reversal candlestick forms that will be your buy signal. Then place a buy stop pending order just 2-3 pips above that candlesticks high.
• To set take profit. Use the previous swing high level (see chart below).
• Place your stop loss 3-5 pips below its low.
• If price breaks upwards, your pending buy order will be activated and you will be in a trade.

If you get stopped out on 38.2 level, and price goes down to 50 level, do the same thing again. If you get stopped out on 50 level and if price goes down to the 61.8 level, repeat the process.

Below is the chart of a buy trade setup explaining the process:

Short Entry:

• Market must move be in a clear downtrend and then it will start to rise up eventually.
• Make use of the Fibonacci tool and click and drag at the start of the trend to the level where the trend has started to reverse back up and that would give you the fib retracement levels to watch for.
• The Fibonacci levels to be used are 38.2, 50 and 61.8. Now just wait to see if price reverses down to any of these levels and if it does so you move to the next step below.
• Then keep a watch to see if a bearish reversal candlestick forms that will be the sell signal. Then place a sell stop pending order just 2-3 pips below that candlesticks low.
• To set take profit, use the previous swing low level (see chart below).
• Place your stop loss 3-5 pips above its high.
• If price breaks downward, your pending sell stop order will be activated and you will be in a trade.
• If you get stopped out on 38.2 levels, and price goes up to 50 level, do the same thing again. If you get stopped out on 50 levels and if price goes up to the 61.8 level, repeat the process.

Below is the chart of a sell trade setup explaining the process:

Pros :

• Many traders use it so it’s best to pay attention to it.
• If the market conditions are right, the risk to reward ratio of this trading system can be in excess of 1:5.
• It is very simple system to follow.

Cons :

• No Indicator is 100% accurate, same is with the Fibonacci. Not all the time price will move back to a Fibonacci retracement level

• Price can sometimes move to a Fibonacci retracement level and not respect it which means you can get stopped out.