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
peaks or valleys—we have to look for breakout signals. The combination
of different chart patterns with the PHI-ellipse can result in such trad-
ing situations. Typically, a head and shoulder formation, a rectangle, a
diamond, or a triangle can be formations that can be combined with
PHI-ellipses. At the very end of the PHI-ellipse, the breakout either up
or down can be accompanied by a candlestick pattern. The most impor-
tant indication to look for is that different peaks and valleys on the up-
side, downside, and the median line give the PHI-ellipse a stable form.
Once the markets price breaks out of the PHI-ellipse, a decent
profit target is the height of the PHI-ellipse. For the PHI-ellipse can be
either thicker or thinner in each formation, the prof it target can be
either closer or further away. The height of the PHI-ellipse is the same
as if we worked with the Fibonacci ratio 1.000. As the stop-loss price,
we can use at its easiest form the median line of the PHI-ellipse. But
stop-loss points and prof it targets can be modif ied individually by the
trader with rules of candlestick patterns, other Fibonacci trading
tools like the PHI-channel, or different 3-point chart patterns as de-
scribed in earlier chapters. The horizontal PHI-ellipse in combination
with candlesticks or 3-point chart patterns can be used for daily and
intraday data, for short-term or long-term analysis.
When evaluating the overall importance of the trading concepts,
it can be said that candlesticks are the least important ones. They are
only important if it comes to f ine-tune the entry or exit signal. They
are of importance if we are looking for countertrend signals at the bot-
tom or top of the PHI-ellipse or for breakout signals when working
with horizontal PHI-ellipses. But if we look at Fibonacci trading tools
and chart patterns, it hardly can be said what is more important, for
example, a head and shoulder formation, or a PHI-ellipse that sur-
rounds the head and shoulder formation. But the only fact that counts
is that through the combination of, for example, the PHI-ellipse with
the head and shoulder formation, the trading signal becomes easier to
identify, the stop-loss point can be placed without hesitation, and the
prof it targets are known already at the same time when the entry sig-
nal is generated.
This is what the whole book is about. The combination of can-
dlesticks, Fibonacci trading tools, and 3-point chart patterns shall
make you a more successful trader at less risk on each position traded.
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