Battle attacking price swings with the Fibonacci Circle
The Colosseum, ancient Rome. Outnumbered, facing opponents that are armed to the teeth, gladiators crept into the arena ready to meet their fate and earn their freedom. The choice before them was simple — fight, kill, win and live — or vice versa.
Banding together, even with the thinnest of alliances, often increased the odds for success and survival. Taking advantage of the Colosseum’s circular arena afforded advantages when maneuvering and taking defensive positions. This allowed gladiators to pick opponents off, one by one — permitting them to go on the offensive when the time was right.
When price is on the attack, with wild swings that threaten to cut your account in half, you can battle back strategically using Fibonacci circles. Used correctly, this maneuver can provide a place of both refuge and attack when the moment is right.
Circles that reign in attacking price
By the time the Colosseum opened for business in 80 A.D. the gladiator games had come a long way. Far from the free-for-all battles to the death, it was now a well-organized, efficiently-run blood sport. Fighters were put in classes based on their record, skill level and experience. Dana White, president of the UFC would have been proud.
Today, price swings — regardless of their size — can be quickly organized and classified using the Fibonacci retracement tool. When they’re drawn, this equation gives you the projected points in the future where (and when) price will likely intersect for another round.
Used properly, you can locate potential entry locations where price will reverse or continue depending on volume conditions.
Advance warning when price is about to attack
The most popular fighter styles were the ‘thraeces’ and the ‘murmillones’ who fought with a sword and shield. Then there was the ‘retiarius’, the gladiator who tried to trap his opponents with a net, before moving in with a trident for the kill. If they missed, it was lights out, since they were completely defenseless.
When taking on a violent price swing, many traders are defenseless as to where price is headed or what they should do about it. Instead of getting caught on the wrong side of a move, or guessing as to when you might see a swing — grab the Fibonacci tool and draw the circles in a matter of seconds.
Simply drag from the highest point on a swing to the lowest (or vice versa) and you’ll see a series of circles extending beyond the swing. These tell you — with a high degree of probability — where / when you’ll see action again.
Note our ES example here. Beyond the initial swing (see the dotted line from the high to the low), you’ll find that price came back and visited these levels again… aggressively.
Don’t let price swing wildly on its own. Get the upper hand and lie in wait by knowing where it’s headed.
Attack entries with confirmation that you’re on the right side
Interestingly enough, gladiators didn’t always fight to the death. In fact, the matches were regulated, refereed affairs. It’s speculated that the gladiators were trained to wound — not kill — so that the promoters could get more action out of them over the years. Setting the Hollywood drama aside, it was clearly a business where the assets were protected.
Today, you can protect your account and plot high probability entries — using a tool that won’t cost you a dime. With the Fibonacci circles, you can mark your entry locations and wait as price advances. No need to take unnecessary risk until it does.
When price reaches the appointed circle, verify that you are in an extreme condition using RSI (Relative Strength Index) or MFI (Money Flow Index). This will give you the final confirmation you need that a reversal may be imminent and that it’s time to lunge forward with an entry.
Using our example, note how price behaved when crossing the 138 circle — the RSI was still in the middle, indicating that there was still more drop likely left. (And drop it did!) When it reached the 161 circle, the RSI had bottomed out — a good time to get in for an entry and head for the ride back up.
Spot the big moves that drive price – and win with them
Patience with price = living to fight another day
During periods of volatility, price has a habit of doing what it wants. Like an opponent with nothing to lose who’s willing to risk it all, lots of people can get hurt in a hurry. Many traders argue that it’s better to simply wait.
Instead of sitting on your hands, you can proactively plan with Fibonacci circles. Putting these projections in place — and advancing them as price continues with successive swings — gives you advance warning when to expect renewed action.
This allows you to monitor volume, along with whatever oscillator you may choose. When price is on the attack again and volume is spiking, let the candles develop — even if it means that you’re waiting one or two bars past your circle location (but not much more).
Make your move only when you have confirmation — otherwise, live to fight another day.
Profit gloriously by overtaking price swings like a gladiator
It was the timeless movie Gladiator that delivered the ageless truism: Win the people’s hearts and you’ll win your freedom. It’s believed by many that the emperor determined a gladiator’s fate with a thumbs-up or thumbs-down. The reality is that the people got to decide more often than not.
Overtake wild pricing swings when they attack with the Fibonacci circle retracement tool. Simply grab a swing high (or low) and drag to the corresponding low point (or high point). Use the resulting projection circles as places to lie in wait when price circles back.
When it does, strike — either on the breakout on or the bounce. Don’t overplay the position, but let it develop for a bar or two past the projection point. Take your profits and win the heart of your account.