Forex Fibonacci Strategy for Long-Term Traders

The forex Fibonacci retracement strategy for long-term currency traders is a powerful method to pinpoint entries in rising or falling markets. In this particular case, we use a weekly chart to draw fib levels and a daily chart to pinpoint entry levels in the overall direction of the trend. We use the same trading rules as the 38.2% fib retracement strategy for daytraders (please read first).

Download: Download the Fibonacci Retracements MT4 Indicator

Getting started

The first step in our analysis is to draw the Fibonacci retracement levels on the EUR/USD weekly chart from the peak to the low in order to determine the 38.2% fib retracement level. The 38.2% retrecement level of the recent uptrend is located at 0.9579. (see chart below)

fibonacci-forex-weekly-euro-retracement

Then, we look for buy signals in the vicinity of the 38.2% Fib level on a daily chart. (see picture below). We will be using a slightly modificated version of the SMA-Laquerre Forex Trend Strategy (written by Jeff Walker) to spot valid long entry signals.

fibonacci-forex-weekly-euro-entry

A valid buy signal appears at 0.9845. Stop loss is placed 3 pips below the 38.2% fib level at 0.9576.

Trading risk: Buy price- Stop loss price = 269 pips

Exit Strategy: I typically use risk to reward ratio: 1:3 or at least 600 pips profit target for long-term trades (whatever comes first exits the trade)

How did the euro/dollar buy trade work out?

fibonacci-forex-weekly-euro

The euro/us dollar rose more than 3000 pips from our entry level. The trade was exited at 1.0652 for a gain of 807 pips.