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

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SOME FINAL REMARKS
Analyzing Fibonacci price corrections, we found that it is nec-
essary to combine the most important Fibonacci correction level 61.8
percent with other parameters; traded by itself, it is simply too risky.
While the combination with candlesticks improved results, combin-
ing the 61.8 percent retracement level with an entry rule, stop-
loss rule, prof it target, and 3-point chart patterns achieved the best
outcome.
The combination with candlesticks and 3-point chart patterns
can answer another key question of the Fibonacci ratios as well:
Which retracement level is preferable—61.8 percent, 50.0 percent,
or 38.2 percent?
Working with Fibonacci extensions can be important for calcu-
lations of long-term or short-term turning points in the markets. We
found evidence that we can get to price clusters by combining dif-
ferent price targets. Combining support and resistance lines with
Fibonacci price extensions and corrections identif ies price clusters
even more precisely than if we had worked only with Fibonacci ra-
tios. Whereas support and resistance lines are based on peaks and
valleys from the past, price targets calculated by the Fibonacci ratios
are projections into the future. When both price levels overlap, we
get close to defining secure entries and exits at major turning points
in the markets.
Support and resistance lines can also be very powerful trading
tools for determining entry and exit levels. We introduced two entry
techniques: (1) analyzing breakouts of horizontal support and resis-
tance lines and (2) generating entry signals out of trend lines. It de-
pends on whether the strategy of the trader is to work with small, fast
prof its or to stay longer in a trade and wait for the next prof it target.
Market conditions also inf luence which strategy will work better at
different times.
Finally, we combined PHI-ellipse trading with candlesticks,
support and resistance lines, and 3-point chart patterns. We showed
that traders can precalculate trend reversals more precisely if
they combine PHI-ellipses with the Fibonacci ratios. Valuable con-
f irmations of trend changes may also come from the application of
trend channels, support and resistance lines, or regular 3-point chart
patterns.
To prove that PHI-ellipses can be applied to intraday data as well,
we presented some examples on 15-minute price data. PHI-ellipses
have the very best trading potential on intraday data. Although it takes
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