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

Table 4.12
Trading Signals 
Profit/
Loss in
#
Entry Rule
At
Exit Rule
At
Points
1
Buy long
1,113.00
Sell reverse
1,131.00
18.00
2
Sell reverse
1,131.00
Stop-loss
1,145.00
(14.00)
3
Sell short
1,136.00
Buy reverse
1,101.00
35.00
4
Buy reverse
1,101.00
Sell reverse
1,133.00
32.00
5
Sell reverse
1,133.00
Buy reverse
1,089.00
44.00
6
Buy reverse
1,089.00
Sell reverse
1,076.00
(13.00)
7
Sell reverse
1,076.00
Buy reverse
1,040.00
36.00
8
Buy reverse
1,040.00
Stop-loss
980.00
(60.00)
9
Sell short
975.00
Buy reverse
912.00
63.00
10
Buy reverse
912.00
Sell reverse
931.00
19.00
11
Sell reverse
931.00
Buy reverse
866.00
65.00
12
Buy reverse
866.00
Open
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PHI-CHANNEL APPLICATIONS
•
113
demonstrated that PHI-channel lines drawn weeks or months ahead do
not lose any degree of quality. The biggest limitation of PHI-channels
lies in the ratios of the PHI series, which quickly get too big to create
meaningful PHI-channel lines for the future. To solve this problem and
to stay close to the markets, we have to work with every signif icant
peak or valley in sequence.
Newcomers to 
Fibonacci
tools and graphic means of market
analysis often f ind it diff icult to correctly detect PHI-channel base-
lines and the peaks and valleys through which to draw the outside
parallel lines. Almost all traders, at f irst, make the mistake of over-
looking the most signif icant peaks or valleys and, instead, choose
smaller ones that bring PHI-channel lines closer to the markets.
How can traders distinguish correct PHI-channels from false ones?
A correct PHI-channel is identified by looking at whether the first major
turning point in the market after the PHI-channel is drawn f inds its
support or resistance in the f irst PHI-channel trend line or resistance
line drawn at a ratio 0.618 or 1.000 (at most). Once this condition is
met, we can be sure that the following PHI-channel lines drawn at
higher ratios from the PHI series will be important support or resis-
tance lines as well.
PHI-channel lines can be drawn exclusively with the WINPHI
software. Readers should check the User Manual for instructions on
quickly and easily getting to PHI-channel trend lines and PHI-channel
resistance lines. The example in this chapter and additional sets of
sample market data are included in the WINPHI program.
PHI-channel lines are terrif ic tools to map out price action and
to make investor behavior visible. Market swings can be followed up
and down like a road map, as long as traders select the correct PHI-
channel lines. Our f indings are a strong indication that market price
action is not random, but symmetrical. Just as Elliott realized, mar-
ket price movements are like the tide, smoothly swinging forward and
back again.
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