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

Figure 5.34
S&P 500 chart from 02–01 to 11–02. Simulation of trading signals
based on PHI-ellipses daily (EL: entry long, ES: entry short, XL: exit long, XS:
exit short, S-L: stop-loss, TS: trailing stop).
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WORKING WITH PHI-ELLIPSES ON DAILY DATA
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Generalizing the quality of this trading approach is impossible
with a time period of just 22 months and signals for only one product.
Nevertheless, because the test period includes uptrends, downtrends,
and sideward market conditions, it clearly indicates the potential of
trading PHI-ellipses.
To avoid complicating the chart with too many outside lines, we
show only the relevant PHI-ellipses and omit the outside lines of the
PHI-ellipses. Interested readers can work with the WINPHI program
and the data on the CD-ROM to generate the same signals and study
the concept. Prof its and losses can be checked trade by trade accord-
ing to Table 5.1.
This trading approach always stays close to the market action. It
works best in volatile products such as stock index futures, f inancial
futures, cash currencies, or volatile commodities. It is easy to follow,
but it takes discipline to execute the trading signals.
There might be times when there is no peak or valley close
enough after the entry and, therefore, the original stop-loss might be
Table 5.1
Trading Signals 
Profit/
Loss in
#
Entry Rule
At
Exit Rule
At
Points
1
Buy long
1,165.00
Trailing stop
1,244.00
79.00
2
Sell short
1,248.00
Buy reverse
1,228.00
20.00
3
Buy reverse
1,228.00
Stop-loss
1,202.00
(24.00)
4
Sell short
1,174.00
Buy reverse
1,087.00
87.00
5
Buy reverse
1,087.00
Stop-loss
1,073.00
(14.00)
6
Buy long
1,115.00
Trailing stop
1,131.00
16.00
7
Sell short
1,117.00
Buy reverse
1,102.00
15.00
8
Buy reverse
1,102.00
Trailing stop
1,154.00
52.00
9
Sell short
1,134.00
Trailing stop
1,132.00
2.00
10
Buy long
1,092.00
Sell reverse
1,077.00
(15.00)
11
Sell reverse
1,077.00
Trailing stop
1,040.00
37.00
12
Sell short
975.00
Buy reverse
912.00
63.00
13
Buy reverse
912.00
Sell reverse
932.00
20.00
14
Sell reverse
932.00
Buy reverse
866.00
66.00
15
Buy reverse
866.00
Open
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