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

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CANDLESTICKS, CHART PATTERNS, AND FIBONACCI TOOLS
signal. In short: We are looking for turning points countertrend to the
market action. The second option is working with PHI-ellipses that
are placed horizontally on the chart. In these cases, we are looking for
breakouts either up or down out of the PHI-ellipse. In other words:
We get trading signals in the direction of the market trend.
PHI-Ellipses Countertrend
We can draw PHI-ellipses if we have at least three points, the start-
ing point and one point on either side of the PHI-ellipse.
Because PHI-ellipses can only be drawn after a 3-wave price
swing (two impulse waves and one corrective wave), the second im-
pulse wave has to be at least as long as the f irst impulse wave.
In most cases, the longer the PHI-ellipse, the stronger is the
price correction if we analyze the end of the market swing correctly.
This is why products like the S&P 500 Index, Nasdaq 100 Index, Dax
30 Index, DJ EuroStoxx 50 Index, cash currencies, or f inancial fu-
tures with high volatility and big price swings can be best traded
with the PHI-ellipse.
Once the first PHI-ellipse can be drawn based on a 3-swing price
pattern, we still might not have found the f inal form of the PHI-
ellipse. Although we have chosen the starting point and two side
points correctly, the f inal form might be longer or shorter, thicker or
thinner. To solve this problem, we combine PHI-ellipses with 3-point
chart patterns and candlestick patterns. We can also anticipate the
f inal point of the PHI-ellipse with support and resistance lines, or
with Fibonacci correction levels and extension levels.
We have explained Fibonacci ratios, candlestick charts, and 3-
point chart patterns in detail in the previous chapters to help inter-
ested traders f ind suitable combinations for entry rules that lead to
higher prof its at controlled risk.
The following examples are typical of prof itable combinations of
PHI-ellipses, candlestick patterns, and 3-point chart patterns. The
selected charts can only be reworked by using the free WINPHI pro-
gram that accompanies this book. Traders who want to test our strate-
gies online and /or intend to develop their own strategies based on our
recommendations can f ind an excellent analysis platform at www
.f ibotrader.com.
Our f irst example of a PHI-ellipse trade countertrend in com-
bination with candlestick charting and regular chart patterns is on
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