Candlesticks, Fibonacci, and Chart Pattern Trading Tools : a synergistic Strategy to Enhance Profits and Reduce Risk

Figure 4.12
Big swing, big correction, previous 1-day high entry; medium swing,
medium correction, 2-day high entry; small swing, small correction, previous
3-day high entry rule. 
Source: The New Fibonacci Trader
, by Robert Fischer (New
York: Wiley, 2001), p. 60.
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APPLICATIONS OF TRADING STRATEGIES
Sample parameters for an investment in the S&P 500 Index
might look like this:
• The minimum initial swing size in the S&P 500 Index is set to
80 basis points (a sample move from 1,000.00 to 1,080.00). If no
correction is as big as 61.8 percent, we do not get a signal.
• We never try to catch up with a runaway market, no matter how
strongly the S&P 500 Index might start to move, unless we get an-
other entry chance that adheres to the rules of price corrections.
• When a correction reaches the level of 61.8 percent, we have to
enter long on the buy side at the previous day’s high, or short on
the sell side at the low of the previous day.
• After we are invested, we work with a profit target of 0.618 times
the total swing size of the f irst impulse wave. We work with a
trailing stop that is set at the lowest low of the previous four
days. Our stop-loss level is def ined at the low of the starting day
of the initial impulse wave.
• We do not follow a reentry rule. If we get stopped out, we wait for
a full new swing high or low based on the minimum swing size;
only then do we start looking for new trading opportunities.
Trading Signals
All of the buy and sell signals that are presented in this section are
based on calculations from daily bar charts. At the end of this chap-
ter, we provide readers with years of computer test runs on various
products. We use three examples—the S&P 500 Index, the DJ Euro-
Stoxx 50 Index, and the Japanese Yen in the cash currency market—
to explain valid strategies for making money through price correc-
tions. We remind readers, however, that these illustrations are
purely for educational purposes and are not recommendations for spe-
cif ic trades.
The book’s CD-ROM enables every investor to generate the same
results that are shown here because the sample data sets we used are
included with the software.
Based on the preceding set of parameters for swing size 
from highs to lows and lows to highs, retracement, entry rule, prof it
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