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The Fantastic Four: Fibonacci, Pivot Points, Round Numbers and Trend

The Fantastic Four: Fibonacci, Pivot Points, Round Numbers and Trend

With so many technical tools available on the CMC platform it can often be hard to know which tools and in what combinations of tools to use when searching for trading ideas. This week I want to show you the power of using 4 relatively simple tools that are freely available on the platform to build a potential trading scenario.

OK, so you might have guessed from the title that I plan on combining the following:

  • Fibonacci
  • Pivot Points
  • Round numbers
  • Trend

First let me start with trend. I am going to use the EURUSD chart to illustrate. I prefer to begin with the daily chart and work down through the timeframes to ensure they are in agreement and in a strong downtrend. This is the sort of market I like to trade as frequent subscribers will know!

The daily chart is making successive lower highs and lower lows as it moves lower…

TWP 1 5 November

The same can be said for the 4 hour chart …

TWP 2 5 November

Again, the 1 hour chart is in agreement …

TWP 3 5 November

15 minute chart; ditto!

TWP 4 5 November

From this point on I will be working with the 15 minute time frame and apply the other 3 technical tools. Firstly, I am going to add in the Pivot Points to the chart. As you can see all you need to do is click technical, overlays and scroll to the left until you find pivot points.

TWP 5 5 November

Now that the pivots are on my chart does this mean much? Not yet. Let me now draw in the Fibonacci and see if the 50 or 61.8% Fibonacci levels line up with any of these pivot points.

TWP 6 5 November

Well how about that, the 50% lines up perfectly with the blue pivot. One other point I would like to make now is that just above the blue pivot point there is the 61.8% Fibonacci level. This level is also sitting more or less on top of a round number of 1.0900.

Why do round numbers matter you ask? Round numbers work as a psychological support and resistance level very often in the markets, by themselves it’s nothing major but when combined with other factors they can form part of a trading strategy.

Let’s recap:

  • A multiple timeframe downtrend, form the daily down to the 15min chart
  • A pivot point clustering with the 50% Fibonacci level
  • The 61.8% Fibonacci clustering with the 1.0900 round number

Based on the above factors there could be an opportunity should price move back up into the area around or between the 50 and 61.8% Fibonacci levels which I will be monitoring closely in the coming hours.

As traders, we are always looking for areas that give us reason to hunt a trade down, an area where, based on various factors, we believe there could be an opportunity. This combination on EURUSD illustrates one of the ways I do this. I hope it helps.

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