Posted by forex at 7:52 AM
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How to trade on harmonics
1. Identify a security. This can be a stock, bond, currency or any other reasonably liquid and volatile asset traded on a market with frequent pricing.
2. Identify your trading cost. Primarily, this is whatever commission you pay your broker in order to buy or sell a security through their system. This is important because you must ensure your profits cover your trading costs, or you will lose money on every trade when costs are taken into account.
3. Obtain graph and price data. You can use an integrated day trading platform, or simply use the software or Web site provided to you by your discount broker.
4. Input price data into a Fibonacci retracement calculator. You will need the most recent high and low prices for the security.
5. Identify the Fibonacci retracement level prices for your chosen security. The Fibonacci retracement calculator will tell you what prices the system predicts may prove to be inflection prices, or turning points for the stock.
6. Monitor the market. Look for signs of a turnaround at or close to the Fibonacci retracement price predicted by the calculator.This can include a leveling off of the price and/or an increase in trading volume as the security approaches the targeted price level. If technical data confirm the Fibonacci retracement level and the stock appears likely to change direction, proceed to Step 7.
7. Buy or sell the stock.