Fibonacci, fractals, RSI, CCI, Pitchfork Tool, Volume, Gap And Scalping Trading Tips And Tricks
Practical 78.6% Fib Investing
Fibonacci traders and investors depict the financial markets price structures. Just take a look at any stock chart, you will see their finger prints all over it.
Today, I want to share with market players how to use 78.6% Fibonacci retracement like an intelligent investor.
Before I continue, note that there is no big difference between 78.6% and 75%. One will notice that sometimes, some investors will buy at 75% instead of 78.6% Fibonacci retracement. All good? Alright, let's get started.
When Can One Buy And Hold At 78.6% Retracement In Practical Investing?
Let me give it to you right away. One is looking for financial instruments that quickly lost 75% of their initial stock price within a month or so.
Even if one forgets everything I will be sharing, please do not forget that.
For example a stock is at $32, and within a month or so it is now around $8. That is a fast and huge drop. Are we altogether? Good.
That stock will surely get the attention of the value investors. No mistakes about that. Note that this not a scientific formula. So easy please.
What To Do After Identifying A 78.6% Bullish Stock?
One must check what has caused the fast and huge 78.6% price decline. Among many other causes, one is only interested in financial instruments that are affected by natural causes that are not directly connected to the financial markets.
The most recent example is the coronavirus. In general, factors that will cause major governments and central banks to act in urgency. External factors that will likely push up unemployment.
Another example is one that no one wants is the evil terrorists. Another way to get it is to check it if the FED and other central banks are changing monetary policies or governments are taking precautionary decisions because of those external factors. If yes then stocks that fall into the 78.6%Fibonacci zone within a month or so are bullish candidates.
Another Step For 78.6% Fibonacci Investing
This time the focus is on the innocent stocks or equities. Innocent in this case means stocks that are healthy, but fall unnecessarily. The company is making money, has a strong balance sheet, also in a bullish sector and has a brighter future. One can also ascertain if the stock has passed the Google acid test.
78.6% Fibonacci Retracement Touched Upon
The 78.6% Fibonacci retracement is a significant correction that usually takes place after a bullish trend. In normal conditions, the 78.6% price drop within a short period (within a month) of time is a sharp drop. Now if the 78.6% or 75% price decline derives from an external factor then one will check if it will only have short term repercussions on the price.
Moreover, a healthy business is more likely to shake off those losses in a medium to long term. One is really looking for a healthy bullish stock that has been knocked down big time within a month or so for no good reasons.
Conclusion
A practical investor who is using the 78.6%Fibonacci investment strategy must only invest in Financial instruments that have declined 78.6% or 75% within a short period of time (within a month or so) due to external factors that force major governments and central banks to intervene.
One must refrain from investing in those instruments if they have failed the Google acid test or are fundamentally less attractive.
Lastly, this strategy is more suitable for medium to long term investment purposes.
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This Article Is Written By G Beaulieu Founder Of Dayprotraders.com Website