Surfing 60-foot price waves with Fibonacci time extensions
Few are meant to ride the big wave, let alone the crests found at the Mavericks in Half Moon Bay. They can top out over 60 feet and are recorded on the Richter Scale, not your smartphone.
Assuming you’re ready to ride, knowing when and where is half the battle in taking advantage of the (in)famous winter season. The surf report is one of the most widely anticipated releases for experienced wave chargers.
More than one surfer has traded their moment of glory for panic by not knowing the conditions or when a wave will likely hit.
In the violent bay of the market, the Fibonacci Time Extension tool can help you plot future waves’ price. It’s your surf report when trying to catch the waves of price. This tool could be the difference between legendary success or drowning losses.
An easy way to see when the wave of price will crest
For the brave souls looking to catch the primary swell, you’ll need to arrive either around 8:30 in the morning or around 8:55 at night. All of this, along with wind conditions and sea temperatures, comes courtesy of the daily surf report. An absolute must if you’re serious.
When reading the waves of the market, you have a surf report of your own in the form of Fibonacci ratios.
These ratios are a series of mathematical relationships with the Fibonacci sequence – an equation that plots repeating patterns with astonishing frequency.
These patterns, and the points/ratios within, can be projected out into the future as markers for future events.
The Fibonacci ratios are frequently used to map a number of elements related to price. Via these ratios, the Fibonacci Time Extension plots points in the future when there may be a price action. At each of these points you’re looking for price volatility and potential reversals.
Instead of guessing, you can simply use this tool to mark future moments that may present entry opportunities.
Using Time Extension ratios to spot opportunity
Any decent surf report will tell you not only when the tide will crest, but also the height and exact locations of the swells at each hour of the day. For those who are committed, this allows them to plan for the paddle journey out into the bay to ensure they’re in the right spot at the right time.
No paddling is required when using Fibonacci Time Extensions. When sizing up a price swing, simply click at either the high or low, and drag to the other end of the run.
Time extension ratios give you a glimpse into the future of price in seconds.
As you can see in our ES example the ratios are immediately plotted out for you. You can adjust the points on either end of the tool to adjust the exact portions of the swing that you’re evaluating.
Once in place, it’s the moments where price intersects with ratio you’ll be watching for.
Zooming into our example you’ll see that price movement had a remarkable correlation with the ratio that it intersected with. In each instance, when price reached the ratio, it made a decided continuation or reversal.
The relationship with movement and the accuracy of the timing is enough to make this practice of using this tool worthwhile.
How Time Extensions bring focus to your trading
It’s important to note that the Time Extension tool is focused on moments in time, not direction. As a result, Time Extensions are best used in conjunction with other methods to determine where price is headed.
If you believe a reversal is taking place, the Fibonacci Retracement tool can be quickly used in a similar manner to reveal areas of resistance or pull-back. Like the Time Extension tool, it uses the very same ratios – which are plotted right on your chart for you.
Also, you may have noticed with our example, the ratios may not line up perfectly with each candle every time. This shouldn’t deter you from paying attention to the ratio. It simply means that you need to let price develop as you would when confirming any entry.
Incorporating Time Extensions into your practice strategy will help you gain confidence in its accuracy and ease of use. Before long, you’ll find yourself using it when looking for future trades.
A head start in plotting successful runs
Ignoring the surf report can result in wasted time and missed opportunities.
Give yourself a headstart in picking your entry points with Fibonacci Time Extensions. Use this tool to understand when the effect of a big swing will be seen in price.
Hit F10 in NinjaTrader and drag from a swing high to the swing low of your choice (or vice versa). Mind the 38.2, 61.8 and 100 points on your chart as the day unfolds.
Enjoy the price waves as they hit, because you know they’re coming and you’ll be ready to make your move.
Even if a ratio falls in between a candle, heed its presence and let price unfold. You’ll be pleased by the frequency with which the market recognizes these points in time.
Before you know it, you’ll be entering with the calm zen-like focus of a big wave rider.