fibonacci sequence

The Best and Worst Forex Trading Strategies

The Best and Worst Forex Trading Strategies

Strategies in Forex market operations are a fundamental part of being able to achieve success, since without one, you will find yourself adrift and simply gambling with your money.


Having a strategy provides security and discipline. Finding the perfect strategy is not easy, it requires tests and time to be invested. Of course, just having a strategy does not mean that you are assured of success; on the contrary, using a not-so-good strategy can make you lose a lot of money. Next, we will explore various strategists who, after being tested and analysed, can be classified as bad or good strategies.

Please note that this is only a very brief overview, to see in-depth analysis and education, you will need to find our writings where we discuss specific trading techniques.

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Normally when discussing the different strategies available in the Forex market, they focus on a specific trading method that unfortunately is nothing more than a facet of a complete trading plan and does not represent the entire negotiation process itself.

This leads us to wonder: How do I know how good a Forex strategy is? Well, the answer lies in the fact that if the strategy is advantageous and consistent then it is good.

 However, you must have in mind other aspects of the strategies so that you’ll make sure that you are following the right path.

– Position’s size

– Risk Management

– Ways to exit a trade

A good strategy will depend massively on the type of trader that executes it, since the trader has the responsibility to understand his personality as a trader obtaining from this self-study the right amount of  knowledge to find the best Forex strategy that can adapt to its needs.


Therefore, we will focus on simple, basic and generic strategies that adapt to any type of trader. Here at The Doji Trader, we believe that psychology and personality play a huge role in the success of any trader, if you would like to find out more information on this, please click here.

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By using this strategy, you gain an advantage in the 60-minute time frame when you enter the market. The currency pairs that are usually traded using this technique are EUR / USD, GBP / USD, USD / JPY and the AUD / USD.  


To make good use of this technique, you must make use of an impulse indicator of 100 pips, as well as indicator arrows; tools you can find in MetaTrader 4.

Buying with this Strategy

The pips indicator will give you the signal when it is the right time to use it, it will be when the Momentum 100 pips indicator activates a buy signal and the blue line is ready to cross the red line from below. Once that is ready, the stop loss should be placed just below the red line of the indicator. Once these steps have been followed, the trade can be closed after 30 pips.

Now, if you want to sell, then you will have to enter a short position just at the moment when the 100 pips Momentum indicator activates a sale signal when its blue line crosses the red line from above and the Indicator arrows proceed to give a red arrow sign.


Finally, you must place the stop loss on the red indicator line and once this is finished, you must proceed to close the operation at the moment when the indicator arrows give a green arrow signal.

The purpose of this strategy is to capitalize on some unique opportunities to be obtained through the additional volatility obtained when London opens. Despite being a very specific technique, it is also very good. It can be used at any time, especially when the price drops sharply in one direction, it also allows you to return from a very strong support / resistance area.

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Although most currency traders prefer to do their intraday trades, since market volatility generally offers more positive opportunities in narrower terms, usually the weekly currency trading strategies can provide more flexibility and stability.

For example, a weekly candlestick can provide you with a lot of market information. This contains five daily candles and changes that give visibility to trader on the real market trends. Then, all weekly strategies are generally based on lower position sizes thus avoiding excessive risks. 


 In order to use this strategy, the use of the exponential moving average indicator is used. Then, the last daily candle of the previous week must be closed at an objectively higher level than the exponential moving average value. Once this happens, you should look for the moment at which the maximum level of the previous week is broken, then proceed to place a purchase order in the closed H4 candlestick, considering that it must be at the level price level broken.

These types of strategies are useful as most of the breakdowns do not usually become long-term trends. Therefore, a trader who uses this type of strategy has the objective of obtaining an advantage of the tendency of prices to recover both in the maximums and in the minimums that were previously established.


These are considered the best Forex trading strategies, because they generate a lot of confidence among traders because of their high success rate.  

In all types of markets, we will many techniques that are not as feasible or advantageous as others. It is important to keep in mind that if we find offers from people online, or many trading ‘miracles’ that sound too good to be true, there is a high probability that it is actually too good to be true…


Below you can find some strategies that we do not recommend when trading.

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This strategy is very popular among beginner traders. It is a scam and only used by inexperienced traders and charlatans, it is unfortunate that so many will blow their whole trading accounts by following this. The plot of this technique is based on chasing your losses by subsequently adding larger operations to your already losing position in an excessive way.

It is well known that the sensation when using scalping is very good, you are the boss and trade expert. 2 pips here, 3 pips over there and you feel so excited that adrenaline can be savoured. But as on many trading accounts, you will find yourself at a disadvantage due to the spread. To be more specific, let’s see it this way: when a winner of 4 pips is hit, the market is in the duty to immediately move 5 pips and thus cover the cost of its margin / commission. This means that the spread is consuming 20% of its profits and is also amplifying its loss just before the price has moved.


For this same reason, it would need to beat the market by a very wide margin in order to counteract the spread that corresponds to each operation. Although it doesn’t seem like a significant loss, it will cause this minimal statistical disadvantage to deactivate your account.

However, it must be noted that we believe scalping to be one of the most effective and useful trading strategies, and it is so popular among both professional and retail traders. It is not an easy task, but if you feel up to the challenge, you can begin your path to being a great scalper right here. If you wish to scalp for profits regularly, but feel that the high spread of your account just renders your time unworthy, then why not look on our broker reviews to find out which broker is the most cost-effective?

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Knowing that not all currency pairs behave in the same way is to be a mature and responsible trader, however, not everyone manages to be that way. Each currency has its own peculiarities, so each one will move differently, and the inhabitants of each nation will sell and buy their coins depending on their territorially political and economic situation. Therefore, decisions are made every day that will affect the movement of a particular currency in one way or another. So, this leads us to the conclusion that these types of practices (or strategies) should be used less times than recommended, there are many operators in the market who are dedicated to apply this strategy over and over again even if they don’t get results, either from boredom or despair and desire for quick success. It is critical and basic thinking, knowing that the idea of exchanging several pairs at once is a mistake and that it is best to concentrate on one and take care to study it properly.


Once you find a currency pair that really works for you and to which you can extract good profits, you can consider expanding your sales and purchases. Trading is often about finding where you have an edge on the market and zoning in on that specific area.

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It is always good advice to take to know that the fact that a strategy works for another person does not mean that it is equally successful for you. However, there are strategies that are usually much more general and that usually work for a good percentage of the population, which means that trying them is not a bad idea. On the other hand, if we are in front of a strategy that seems to be a fraud and that has several negative aspects, it would be best to stay away from such strategies, to avoid unpleasant moments and significant losses.


But the most important thing is that any strategy that you have not used before, you should try it for a while, without risking much of your capital, in order to draw your own conclusions and even customize it.

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This does not constitute investment advice or personal recommendations as your specific financial circumstances have not been considered. No warranty is given in regards to the accuracy and completeness of information. Past performance is not an indicator of future results.

Posted by Alex in Lessons

How to Trade Fibonacci Sequence

How to Trade The Fibonacci Sequence

The Fibonacci sequence, which is the basis for the Fibonacci levels in Forex, was discovered by Leonardo de Pisa, an Italian mathematician. Nicknamed Fibonacci, Leonardo de Pisa was born in the year 1170 in the Italian city of Pisa. He traveled a lot with his father and lived with him in Bejaia, a Mediterranean port in northern Algeria, where he studied mathematics.

During his extensive travels, the young Leonardo learned the benefits of the Hindu-Arabic numeral system, and on returning to Italy in 1202, he documented his discovery in his famous work — ‘Liber Abaci’, which popularized the Hindu-Arabic numeral system in Europe.


In the book, he described a sequence of numerical numbers now known as the Fibonacci sequence of numbers.

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The Fibonacci sequence of numbers is a numerical series documented in Leonardo’s ‘Liber Abaci’. In the sequence, after 0 and 1, every number is the sum of the two numbers before it. Thus, the Fibonacci sequence looks something like this: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, and so on.


As you can see, the sequence can extend to infinity. Looking at the numbers, you will observe that every next number is approximately 1.618 times larger than the preceding number — or the other way round, each number is 0.618 of the number following it. For example, if you divide 55 by 34, you will get 1.618, and if you divide 34 by 55, you will get 0.618.

With the exception of the first few numbers, dividing a number in a number in the sequence with the preceding number gives a fairly consistent ratio. From the example above, the ratio is 1.618, and its inverse is 0.618. This value, 1.618, is known as Phi or the golden ratio — it occurs in several aspects of life.

Apart from the golden ratio and its inverse, other ratios can be derived from the Fibonacci number sequence. For instance, 0.382 can be gotten from dividing a number by the number two places to the right — say, 89 divided by 233. Another important ratio is 0.236, which is derived from dividing a number by the number three places from the right — say, 34 divided by 144.


While you may find other ratios from the Fibonacci number sequence, when it comes to forex trading, the most important Fibonacci ratios are these four: 0.236, 0.382, 0.618, and 1.618.

Apart from its significance in Forex technical analysis and the rest of the financial world, the golden ratio (1.618), or its inverse (0.618), has been shown to appear frequently in every aspect of life, from biology and the natural world to fine arts and architecture, to all parts of the universe (even patterns of solar systems).

For instance, the ratio has been observed in the Parthenon, tree branches, sunflowers, rose petals, mollusk shells, Leonardo da Vinci’s Mona Lisa, human faces, spiral galaxies of outer space, and the ancient Greek vases.


One of the most famous examples of the golden ratio can be seen in the nautilus shell. The nautilus shell expands in a logarithmic spiral, which follows the Fibonacci ratio. Connecting the arcs with squares, or Fibonacci tiling, it becomes obvious that the sizes of the squares follow the golden ratio.

Obviously, one of the areas where the Fibonacci ratios are often applied is in Forex technical analysis, where they are used to mark price retracement and extension or expansion levels — the Fibonacci levels. Converting the ratios to percent gives the Fibonacci levels.

So, the 0.236 ratio becomes the 23.6 % Fibonacci level; the 0.382 ratio becomes the 38.2% Fibonacci level; the 0.618 ratio becomes the 61.8% Fibonacci level; and the 1.618 ratio becomes the 161.8% Fibonacci level.

Apart from the four levels — 23.6 %, 38.2%, 61.8%, and 161.8% — other levels are derived from different combinations of the four basic ratios. For example, 100% level is gotten from adding 38.2% and 61.8%; 123.6% is gotten from 100 and 23.6; 138.2% is gotten from 100 and 38.2; while 261.8% is gotten by adding 100 and 161.8.


Although 0.5 is not usually seen as a Fibonacci ratio — not technically true since 1 and 2 are in the Fibonacci sequence and 1 divided by 2 is 0.5 — the 50% level is added in the Fibonacci tools because it is a significant level in the Dow Theory.

Almost all trading and charting platforms, if not all, have some or all the Fibonacci measurement tools, which traders use to mark important price levels or timelines. There are several Fibonacci tools you can encounter on these platforms, such as:

·        Fibonacci retracement/extension

·        Fibonacci expansion

·        Fibonacci fans

·        Fibonacci arcs

·        Fibonacci channels

·        Fibonacci time zones


But Fibonacci retracement/extension and Fibonacci expansion are the most widely used Fibonacci tools.

Depending on the levels added, this tool can have two parts: the retracement part and the extension part. The retracement part consists of horizontal lines that indicate the 23.6%, 38.2%, 50%, and 61.8% retracement levels from the preceding price swing high or swing low, while the extension part consists of the -23.6%, -38.2%, -61.8%, -100%, -161.8% extension levels from the preceding swing high or low.


Obviously, the retracement levels show the percentage of the previous swing the price can pull back before it starts moving again in the trend direction. The extension levels, on the other hand, show the percentage by which the price is extending beyond the preceding swing’s high or low.

You apply this too in a trending market when a pullback starts. To pick this tool from the MT4 platform, click on Insert and click on Fibonacci from the dropbox. Then, click on Retracement. On the chart, place the first point on the price swing high/low, from where you want to start your measurement, and drag it to the most recent swing low/high before the current pullback.


So, in an uptrend, you start from a swing low and drag to the most recent swing high, while in a downtrend — as you can see in the EUR/USD chart below — you start from a swing high and drag to the most recent low. In the chart below, the pullback has reached the 50% retracement level.

A screenshot portraying a 50% Fibonacci retracement.

The expansion tool functions just like the extension levels, in the retracement tool in that it projects where the price can get to after a pullback. However, unlike the extensions levels that project how far the price can extend from the preceding swing low/high, the expansion tool measures the price expansion from the pullback’s high/low.

Just like the retracement tool, it is used in a trending market. You apply the expansion tool when the pullback has completed and the price has resumed in the trend direction. The tool has three points that must be fixed at the starting swing high/low, the recent swing low/high, and the current pullback’s high/low, as the case may be. To get the tool in an MT4 platform, go to Insert > Fibonacci > Expansion.


Take a look at the EUR/USD chart below. The price is in a downtrend, so the three points of the expansion tool are attached at the starting swing high, a swing low, and the highest point of the pullback. We didn’t use the most recent swings and the current pullback, because we aren’t sure the pullback is over and also to show the reactions at the expansion levels. Note the reactions at 50%, 78%, and almost 100% expansion levels.

A screenshot portraying a Fibonacci retracement.

There are other Fibonacci tools, such as the Fibonacci fan, arcs, spirals, channels, and time zones. All the tools are based on the Fibonacci ratios. The Fibonacci fan, spirals, and arcs are used to project spatial price points and levels, while the Fibonacci channels project price direction. With the Fibonacci time zones, you may be able to time the market cycles.

The Retracement Levels

You can use the retracement levels to anticipate where a pullback may end since you can see the levels before the price gets there. Depending on the direction of the trend, the 38.2%, 50%, and 61.8% retracement levels can act like a support or resistance level where the price gets to and reverses.

In an uptrend, the retracement levels can serve as support levels where a pullback may reverse, while in a downtrend, they can serve as resistance levels. Thus, they can be used to estimate where to place stop loss orders. Some traders also use them in breakout trading.


From the picture, you can see the price is at the 50% level and may reverse from there to continue the downtrend. 

A screenshot portraying a 50% Fibonacci retracement.

The Extension and Expansion Levels

These levels also serve as potential support or resistance levels, depending on the direction of the trend. In an uptrend, they serve as potential resistance levels, and in a downtrend, they may become support levels. So, you can use the extension or expansion levels for your profit targets when trading.

Final Words

The Fibonacci sequence is the basis for the Fibonacci levels in Forex trading. It was described by an Italian mathematician Leonardo de Pisa, and its derivative, the golden ratio, seems to occur in several aspects of life apart from Forex. In Forex, the levels derived from the Fibonacci ratios help to identify potential support and resistance levels before the price gets there.

This does not constitute investment advice or personal recommendations as your specific financial circumstances have not been considered. No warranty is given in regards to the accuracy and completeness of information. Past performance is not an indicator of future results.

Posted by Alex in Lessons