Fibo strategy helps to automate the "Aftershock" trading strategy
How it works
1. When the price touches the 0.5 level, the strategy buys at that level and automatically places a sell order at the 0.618 level.
2. When the strategy buys at the 0.5 level and the 0.382 level, the strategy cancels the sell order at the 0.618 level and places a new sell order at the 0.5 level. The volume of this new sell order is equal to buy orders at the 0.5 level and the 0.382 level. The strategy sells the first order at a breakeven level and the second order with a profit.
3. When the strategy executes all three buy orders (at the levels of 0.5, 0.382, 0.236), the strategy automatically places a sell order at the 0.382 level.
4. The user can place a buy order at the 0.618 level (by selecting the "0.618" checkbox), then the strategy places a sell order in the middle of the 0.786-0.618 channel (by switching the toggle "0.786/0.702" to the "0.702" position).
How to create fibo
Place the zero level at a candlestick which:
- has a first volume that starts a growth phase.
- breakouts a level of a pattern (triangle, wedge, or other figures), thereby giving rise to a new growth phase.
- is a low in the current phase and has a first volume for growth.
A combination of these factors only strengthens the selected zero level for the fibo strategy.
- The essential criterion for placing the zero level is a consistency of the fibo levels with the support levels.
When to use the "Aftershock" trading strategy
1. Backtesting of the strategy shows its validity on a particular asset. If the backtest is positive, use the strategy. If the backtest is negative (pump coin), put an asset on your blacklist and ignore it.
2. At least 30% growth in a phase is preferable for fibo.
3. It is more likely for the strategy to work out with a great volume (the daily trading volume is from 300 BTC, ideally more than 1000 BTC).
- Above all previous criteria, the strategy may not work when a double top on the chart is observed.
In this case, the strategy excludes the 0.618 level from work. Profit from the 0.5 level is not guaranteed as well. Moving the grid to a lower level and starting work from the 0.382 level can help to increase the probability of success.
Extra tips:
- When there is an uptrend, the 0.618 level can be used as an additional opportunity. After the level works out, the fibo starts again from the 0.5 level.
- The strategy's work is over when one of the levels (of 0.5, 0.382, 0.236) works out. For example, the price touched the 0.5 level and then reached the 0.618 level. Further use of the strategy is irrelevant.
- If the daily volume is small, consider the order book of the traded asset to compare it with your deposit.
- Set deviations from the fibo levels to prevent situations when a buy or sell order meets resistance that reduces a chance of making a profit.
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