Trend Trigger is probably the simplest trading strategy based on Fibonacci leleves. The basic assumption here is that we are trading with the trend and that a normal and natural pullback is occurring, and this pullback will stop somewhere in our FibZone and reverse direction.

Rules For Buys (Sells Are Reversed)

1. There must be at least two higher swing high points and at least one higher swing low point. This structurally confirms we are trading with the immediate trend.
2. The current bar low must at least touch the top of the FibZone. At this point, look for an entry pattern to get you into the trade.
3. Once you are filled, a stop loss order should be placed just below the FibZone. This assumes your money management rules will allow you to risk the entire zone. If not, do not take the trade until price drops deep enough into the zone to meet your money management stop loss rules, or reduce the number of shares or contracts to be purchased.
4. Once a swing low point is determined against the FibZone, calculate the .50, .618, and 1.272 extension of the high-to-low swing into the Support FibZone. These levels will serve as profit objectives.
5. The first profit-taking area is between the .50 and .618 retracement range. Once these profits are booked, trail your stop loss to reduce risk,
6. The final objective of a Trend Trigger trade is the 1.272 extension of the high-to-low swing made into our FibZone.

Trend Trigger Strategy Example: Long

1. We have identified two higher swing high points with at least one higher swing low point.
2. Price touches the Support FibZone, and I'm long at 32,60 based on the trigger I use.
3. The initial stop is placed just below the zone around 31,00.
4. With a swing low in place, we calculate the ,50 and .618 retracement levels of the high-to-low swing into support.
5. Profits are taken on half the position between 34.57 and 35.16, which arc the .50 and .618 retracement levels. At this point, I also move my stop to breakeven.
6. The final objective on the trade is 38.47, which is the 1.272 extension of the high-to-low swing into the Support FibZone.

Trend Trigger Strategy Example: Short

1. Two lower swing lows and at least one lower swing high have been identified. Once the second swing low is made, we can calculate price resistance. That zone comes in from 927.50–941.75.
2. Price rallies up and touches the Resistance FibZone, so I go short at 927.50.
3. My stop is at 942.00. That's 145 points of risk.

4– Once a swing high is made into the FibZone, we can calculate the ,50 and .618 retracement of the low-to-high swing into our Resistance FibZone* These price levels are 916.50 and 913.50. 5, Price hits our first target and half the position is taken off around 916.00. My stop is moved down to breakeven (especially on intraday trades). 6. The final objective at the 1.272 extension of the low-to-high swing into resistance is hit at 897.50.

What if a Trend Trigger trade comes up and the FibZone is too large and I am unable to put a stop below the FibZone and risk that much?

Don't take the trade until the stock drops lower into the FibZone (for longs). If your money management rules don't allow you to take the trade, then please don't take it. Risking too much on one trade will come back to haunt you. The other choice is to still take the trade, but trade fewer shares or contracts to keep your risk in line with your money management rules.

Where do you place the stop after hitting the first objective?

Ideally a stop can be placed at your original entry price so that risk can be completely eliminated from the trade. However, there are situations where moving the stops to that level will get you prematurely stopped out of the trade. Be aware of the volatility of the stock, and avoid placing stops at round numbers or levels too close to the current market price.

How long do you typically hold these trades?

That is always dictated by the market. There was an observation that the best trades bounce immediately out of a FibZone and become profitable quickly. If you find yourself looking at a chart where price has hit our zone and it continues to print bars that hover around the FibZone, then you often scratch the trade.

Are there any confirming indicators to use with this strategy?

By definition, this is supposed to be a „trend following“ strategy. We are trying to identify pullbacks into FibZones, So, the stronger the trend, the better the opportunity. A strong ADX reading is an excellent scanning tool, as well as a nice confirming indicator. Use a 14-period ADX of 20 or greater. Ideally, the ADX line is upsloping and not downsloping. This just means the reading is continuing to go higher and the trend is getting stronger. Downsloping means the trend is losing strength.