There is some great analysis in the comments of the last post...take the time to read them.
The first thing I will discuss is plotting Fibonacci lines. There are numerous ways you can do this, and if you have read this blog, Tom C., Trader Jamie, TRADEthemove, or the other resources that are out there you will see many different ideas. And, they all work! As I said before, the key is finding what works for you and sticking with it. You can plot lines over the previous day's range, the previous two day's range, the previous day's open/close to the current day's close/open, the morning session's high/low, or most swing highs/lows (et cetera) and they will all yield valid setups. But if you try to chase all of those different methods over the course of your daily trading, you will most likely miss the good setups and your performance will be mediocre at best, and a disaster at worst.
Consistency is key - there is an old saying, "if you chase two rabbits, both will escape." Figure out what works for you and your style, and focus until you perfect it!
As I mentioned in the last post, I am focused on making the majority of my money in the first hour (or two) of trading. I have found that plotting my Fibonacci lines over the previous day's close to the current day's open yields the highest probability setups for that timeframe.
If you plot the Fibonacci lines as such on the GMCR chart (see below), you will see that price rallied off the opening low, through the retracement zone (RZ), through the Fibonacci extension (FE) and then pulled back to form a hammer-type candle (5th candle) above the FE. There is a setup that readers of this blog know - "beyond the Fibonacci extension"*** - and GMCR forms it in a near textbook manner ("near textbook" because I would have preferred the 5th candle to be a green hammer, but nothing is perfect).
Based on just this information alone you had a valid, high-probability entry. But there are a handful of other indicators that contributed to GMCR being a solid opportunity. I will discuss those in the next post.
***use the search function at the upper left of the site to find similar setups.
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