Day trading strategies include Fibonacci numbers that a pair of seasoned stock sherpas use to guide investments in pursuit of profits.
The day trading strategies include Fibonacci numbers that are used in three key steps aimed at producing potent profits. Successful day trading begins with a daily routine that is conducive to investing profitably.
The process may vary for each investor, but two time-tested tools are preparation and guidance. However, watch out for emotions interfering with the process.
To that point, a City Index survey between November 23 and December 4, 2023, queried 3,000 participants and found the traders who responded to the questions sometimes let emotions caused them to become over-confident, revealing a need to integrate robust risk management practices and a disciplined approach in trading strategies. Whatever one’s level of confidence, effective risk management is essential for safeguarding financial capital amid market uncertainties, the survey found.
Day Trading Strategies Include Fibonacci Numbers: Retracement Lines
Day-trading sherpas such as Ahren Stephens, co-leader of the Trading Room advisory service, are available to help those who seek assistance. Stephens told attendees at the recent Las Vegas MoneyShow that they should create a daily routine to put them in a position to succeed.
The Fibonacci retracement lines can be used in trend-trading strategies. If a retracement occurs within a trend, the Fibonacci levels can be used to place a trade in the direction of the underlying trend. The reasoning is that a heightened chance exists that a security’s price will rise from the Fibonacci level back in the direction of an initial trend.
In addition, Fibonacci levels can be used if a trader seeks to purchase a particular security but has missed out on a recent uptrend. In such instances, a trader can wait for a pullback. Fibonacci ratios such as 61.8%, 38.2% and 23.6% can be plotted on a chart for traders to identify possible retracement levels and enter new trading positions.
Day Trading Strategies Include Fibonacci Number: Daily Routine
Stephens, co-leader of the Trading Room advisory service who uses Fibonacci strategies, told attendees at the recent Las Vegas MoneyShow that they should create a daily routine to put them in a position to succeed.
An ABCD pattern is an intraday chart pattern. It is shown when a stock spikes, retreats, then ascends to break out at a new high of the day. A letter from the ABCD sequence is identified with each of the four major price movements.
The A is associated with a morning rally to new high. The B is for an intraday retreat and consolidation, with the C associated with a rise and break out through the morning’s high. The D reflects a rally to a new high.
The ABCD legs are usually either identical in size or nearly identical in size, Stephens told me. Fibonacci retracements and extensions are used to measure these areas and find extension points, he explained.
Day Trading Strategies Include Fibonacci Number: Know Your Pivots
In trading, we use Fibonacci retracement levels, extensions, Fans and arcs, Stephens continued. In the Trading Room, where price levels are analyzed in the daily timeframes, the simple-to-understand ABCD pattern helps in calculating retracements and extensions to identify price targets, he added.
“When making observations of current price action, we identify support, resistance and Fibonacci levels when coming up with our Pick of the Day service, which is great for traders who don’t have a lot of time to analyze charts,” Stephens said. “We also use these levels from time to time in our Inner Circle subscription, where we provide support and resistance levels before the market opens and identify retracement and extension targets.
“You have to define the major highs and lows on higher time frames to predict where the markets may go, using basic patterns such as the ABCD pattern. Fibonacci is a term derived from a mathematical sequence that starts with 0, 1, 1, 2, 3, 5, 8, 13, 21, and so on. It was named after the famous Italian mathematician Leonardo of Pisa. He introduced it to the Western world in his 1202 book ‘Liber Abaci’.”
Day Trading Strategies Include Fibonacci Number: Know Your Ratios
“By using the correct Fibonacci ratios, you can identify where the Market Makers, Whales, and institutions are buying or selling, and ride on their backs,” Stephens said. “We like to use the 38.2%, 50%, 61.8%, 78.6%, and the extensions of 127.2%, 161.8%, and 200% or double the range.
"Many traders get too involved in choosing the right Fibonacci ratios. Using the major Fibonacci ratios will put you in the same field as the bigger traders.”
Day Trading Strategies Include Fibonacci Number: Enter at Retracements, Exit at Extensions
“By identifying clear reversal points, it is possible to catch a trade all the way to an extension point,” Stephens said. “By identifying clear retracement areas in a wave, we are able to take a trade all the way up to an extension many times and capture most of a move.
"For example, on a recent chart, we identified a Fibonacci retracement area near $495.36, and we were able to take the trade well up into the $510 area to complete an up wave ABCD pattern. Now, some may have sold earlier than that, but by finding these levels, we can ride on the backs of larger traders as well as trade in the direction of the major trend.”
Day Trading Strategies Include Fibonacci Number: Ultimate Trading Workshop
Senior partner Hugh Grossman also teams up with Stephens to offer their Ultimate Training Workshop about how to day trade successfully. They created a set of training videos based on a live event held a few months ago, teaching everything they thought would help with day trading.
“No stone is left unturned,” Grossman said. “If you have never traded options before, this is what you need. Even if you are a seasoned trader, the nuances, tips, tricks and traps you will pick up from this series of 11 sessions, each roughly an hour and a half in length, will benefit you immensely.”
The two investment gurus obtained the training they share from “deep in the trenches,” with concepts that cannot be found anywhere else, Grossman continued. Key topics include setting up Schwab (formerly TD Ameritrade) Think or Swim charts to visualize patterns, identifying key indicators and strategies, “repairing trades,” money management and more, he added.
Stephens provides a deep-dive analysis that should answer many questions in the Q&A section, Grossman said.
“It’s all there,” Grossman told me. “Of course, there may be other updated information only available through our trading room sessions, but the Ultimate Training Workshop will provide you the launch pad you need to get started day trading SPY options.”
The videos are available for at least six months and the best part is they can be viewed as often as desired, Grossman said.
“Fast forward, pause and rewind,” Grossman continued. “We recommend going through them at least once completely, even if you are an experienced trader. It’s the little subtleties that can make all the difference in your trading. Take advantage of 40+ combined years of Hugh and Ahren’s market participation… master the UltimateTraining Workshop.”
Rising Geopolitical Risk
Geopolitical risk must be considered during wartime. The threat seems to be worsening, leading to increased interest in quick trading to profit without the risk of long-term holding.
Ukraine is low on ammunition and other military equipment needed to repel intensified attacks by Russian forces who invaded the neighboring nation in February 2022. U.S. Congressional leaders have been unable to compromise on a plan to protect America’s southern border to win support from House Republicans to provide fresh funding of $95.3 billion mainly for Ukraine and Israel. House Speaker Mike Johnson (R-La.) has stated his top priorities are to secure the southern border of the United States and to fund the operation of the U.S. government that recently staved off a default on its debt with passage of a continuing resolution.
But Ukraine’s forces have needed to pull back from strategically important places within its sovereign borders in the face of Russia’s superior manpower and military supplies. The invasion, which Russia’s President Vladimir Putin still calls a “special military operation” more than two years later, now is entering its third year.
Geopolitical Risk Mounts in the Middle East
Meanwhile, the Middle East remains a powder keg with Hamas militants and the Israeli Defense Force (IDF) battling in a war that reportedly has led to more than 30,000 deaths in Gaza alone. The war began on Oct. 7 when Hamas sent fighters into southern Israel in a murderous assault that reportedly killed 1,163 people and included rapes, torture and the abduction of at least 250 others.
Israel responded with a military assault on the Gaza Strip to destroy tunnels used in attacks against its civilian and to pursue the perpetrators of the Oct. 7 butchery. IDF officials report that at least 242 of its soldiers have been killed in Gaza during its military response.
A week-long truce in late November led to Hamas freeing more than 100 Israeli and foreign hostages in exchange for Israel releasing about 240 Palestinian prisoners. However, talks aimed at securing the release of additional hostages have not led to any tangible results yet.
President Biden approved and initiated a humanitarian airdrop of relief supplies for the beleaguered Palestinian civilians in Gaza. Roughly 130 hostages abducted on Oct. 7 by Hamas remain trapped in Gaza. However, Israeli officials say about a quarter of them are dead.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Easter Season Sale! Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is great gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for reduced pricing on multiple-book purchases.
Editor's Note: A version of this column first appeared on StockInvestor.com.