6 ENTRY Techniques using mathematically calculated ENTRY points

6.1 Fibonacci Levels

There have been many, many books written on the Fibonacci retracement and extension percentages. They are used by so many other competent traders that one has to respect the principles and the support and resistance which occurs as result of the Fibonacci levels. Due to the general use of Fibonacci levels a self-fulfilling prophecy is created which turns that level into a support and resistance level.

There are a number of particular Fibonacci levels to watch out for and take seriously. This is when 2 separately calculated Fibonacci levels occur at the same level. This makes the level doubly as strong as a support or resistance level.

Below is a “Readers Digest” (highly summarized) version of Fibonacci trading.

The Fibonacci number sequence is created by adding the previous 2 numbers in a series to get the third number. So you start with 1. 1 + 0 = 1 (the second number in the series). 1 + 1 = 2 which gives you the third number. 1 + 2 = 3, 2 + 3 = 5, 3 + 5 = 8, 5+ 8 = 13 etc. So a series of number are obtained 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89 etc.

Now the next step is to divide any number by the next e.g. 34 by 55 = 61.82% to give a ratio. Alternatively the second last number by the next e.g. 21 by 55 = 38.18%. These ratios are constant no matter how far up or down you go in the number series. These ratios are termed as the Fibonacci retracement ratios.

By dividing the next number by the previous number e.g. 55 by 34 = 161.76% you get the Fibonacci extension ratios which are also constant no matter how far up or down you go in the number series.

So when the market is trending (or if you can identify a clear reference leg in a market move) and starts retracing to the 38.18% and 61.82% levels, they will become support or resistance levels. The price is likely to move to 161.76% of the reference leg, as in this example.

The chart shown above is an example of Fibonacci working on a monthly chart of the GBP. Fibonacci can be traded on short and long term charts and creates a continuous trading model as new reference legs are created on an ongoing basis.

Fibonacci levels provide turning point trade opportunities

When non Horizontal, Horizontal and Fibonacci levels meet (confluence) they create turning point opportunities as shown in a recent trade example.

Basic technique on How to trade turning points using Invisible
Support and resistance

1. 1 Find strong retracement price levels based on the methods above.
2. 2 Assume that the support or resistance will create a turning point
3. 3 Place a pending order or market order to enter a reversal at the retracement level
4. 4 Enter stops and targets appropriate to your currency, timeframe and time of day
5. 5 Amend this approach based on your own experience.

6.2 Pivot Points

Expert4x does not trade Pivot points much and does not use them. This module on Entries will however not be complete if your attention is not drawn to the use of Pivot points. Some traders even calculate pivots points per for each major market session traded i.e. the Asian, European and US sessions.

A Pivot Point indicator does not come standard with MetaTrader4 and because of this we do not promote Pivot Point Trading to our clients. You will however find Pivot Point MetaTrader indicators which are freely available by doing a Google search.

As you will see Pivot Points are calculated support and resistance levels.

For many years, traders and market makers have used pivot points to determine critical support and/or resistance levels. Pivots are also very popular in the forex market and can be an extremely useful tool for range bound traders (Bounce Traders) to identify points of entry and for trend traders and breakout traders to spot the key levels that need to be broken for a move to qualify as a breakout.

In this article, we'll explain how pivot points are calculated, how they can be applied to the FX market, and how they can be combined with other indicators to develop other trading strategies.

Calculating Pivot Points

The prices used to calculate the pivot point are the previous period's high, low and closing prices for a security. These prices are usually taken from a currency’s daily charts, but the pivot point can also be calculated using information from hourly charts. Traders prefer to take the pivots, as well as the support and resistance levels, off of the daily charts and then apply those to the intraday charts (for example, hourly, every 30 minutes or every 15 minutes).

The calculation for a pivot point is as follows:

Central Pivot Point (PP) = (High + Low + Close) / 3

Support and resistance levels are then calculated off this pivot point using the following formulas:

The Calculation of the First level support and resistance:

First Resistance (R1) = (2*PP) - Low

First Support (S1) = (2*PP) - High

The calculation of the second level of support and resistance is calculated as follows:

Second Resistance (R2) = PP + (R1-S1)

Second Support (S2) = PP - (R1- S1)

Please click here to download and easy Excel Pivot point calculator> Pivot Point Calculator Applying Pivot Points to the FX Market

Bounce traders would simply ENTER bounce trades as shown below

Breakout traders would simply ENTER the breakouts through the support and resistance levels

6.3 Grid Trading system ENTRIES

The No Stop, Hedged, Grid trading system works very well in a sideways or slowly trending market.

The system rules are simple

1. 1 Decide of a grid size or distance (say 100 pips)
2. 2 ENTER a Buy and a sell at the same price level
3. 3 Close the profitable trade once the price has moved by the grid distance
4. 4 ENTER into another Buy and sell at that point
5. 5 Continue until all open and closed transactions added up are positive by 50% to 100% of the grid size or distance. Then close all transactions

Notice there is no stop loss used in this system. You can however use stop losses to mechanise the system.

For more information of the grid system Google “Forex Grid trading” or search for “Forex grid trading” on YouTube.

A Trading example

1. The trader decides on a grid size of say 90 pips when trading the EURGBP
2. The trader enters a buy and a sell at the same level - in this example 0.8540

3. The price moves to Level 1. The trader closes the buy deal which is positive (+90 pip gain).

4. The trader enters in to another Buy and Sell transaction at Level 1 at 0.8630

5 The price goes back to the Start level and the trader closes all deals making a 90pip gain ignoring spreads (90 pips gain on the first buy, 90 pips gain on the 2nd sell, 0 gain on the first sell, -90 loss on the second sell).

This is an example of a random calculated entry and exit method which does not take technical analysis and price action into account. It works well in a sideways or slowly trending market an in ideal for bounce trading. It does not even need charts to be traded.