How to trade with Fibonacci levels. Use Fibonacci to define and limit your risk, when a surprise hits the news

Take advantage of surprise opportunities when they occur! Watch our latest video to find out how to trade with Fibonacci Levels, in order to reduce your risk.

How to trade with Fibonacci Levels in a market full of surprises

Hi! This video is going to discuss how to trade surprise news events with Fibonacci retracements. So, sometimes you’re in the market and a surprise hits the news wise and there’s a reaction in the currency pair.

So, how can you use the Fib retracement tool to define, limit your risk? How do you find a way to get into the trade, in order to take advantage of that move?

So, here’s an example that I’ve got today on the 26th of June. So, the surprise news that came out was one of the Monetary Policy Committee members, Haskel, was speaking. Now, he is the new incoming member of the Monetary Policy Committee and he is replacing McCafferty.

So, you essentially had two MPC members from the Bank of England speaking back to back. One, who’s leaving, and one new member. And the significance to this news was that McCafferty is hawkish and Haskel is coming in. So, the question is, with those three hawkish members of the Bank of England with the last Monetary Policy Committee minutes, McCafferty was one of them. So how is Haskel going to alter the mix of the MPC committee? Well, what happened is that he came and he spoke, and essentially he was quite dovish. He’s quite dovish and he spoke about risks if the Bank of England is raised to quickly, so he certainly wasn’t pushing for an interest rate rise, he was more dovish. So, obviously dovish on interest rates is going to result in the pound being sold off and you see that’s what we saw here. The pound was sold off, it was 10 am. Pound dropped. So you would not want to just jump in, necessarily, when that’s happening. You want to get in after a retracement. And this is where the Fibonacci retracement tool comes in so helpful. So, you just click your Fibonacci retracement tool, you go from left to right on the chart. So click on left, these would be the obvious highs here to click on, so click left. I just moved it a bit to the left to give us a bit of space. You move down to the right, which is the bottom of the move, and then you see how price retrace. And then, you want to be getting in common entries, somewhere between the 38.2 and the 61.8 level. So, you would enter there, you put your stop above the high, or some people put their stop above this, sort of, 71-72 level and then you play down to recent lows, and beyond. Some people, you know, they might play an extension of the whole move. So, they might do the extension of this move down to around here, around 1.3150.

So, another example, I’ll quickly show you, because it’s worth having a look at. So, if we look at the US oil chart, now, again this is a favorable drawn on the chart. What’s happening here is, the US have come out and they have said, today, on the 26th of June, they’re urging their allies to kind of limit the exports of oils from Iran. Obviously, if Iran is pumping oil on the oil market, then there’s less supply, but the same amount of demand, so the price of oil is going to increase and that’s what happened. I just put this example to show you. You know, you don’t really wanna be getting in here, these highs, because over time this move can be faded. Where are you going to put your stop? All the way down here, and then, if you’re only going for one leg of the move, it is going to be hard for you. So, enter here 38.2, 50%, 61.8 retracements, stop underneath the lows and you can play another extension of that leg, and then you put in your risk and reward into a good area.

So, there we go, folks! Look out for surprise news, draw your Fib from left to right, look at the 38.2, 50, 61.8 level, pop your stops underneath the lows, and I hope that helps you with your trading and helps take advantage of surprise opportunities when they occur.