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.

At any one time, a Great White has more than 3000 serrated razor-sharp teeth aligned in rows. The Great White is the only shark that will poke its head out of water, possibly to get a view of its prey before attacking. They've also been known to completely jump out of water usually when racing upwards from deep water to catch a fast-moving meal. Sounds like the market, in many ways.

Whether you are looking at an intraday, daily, weekly, or monthly chart, you could have observed an interesting relationship around swing high or low points. When price is approaching the most recent swing high or low point, it faces a key decision at the .786 retracement level. If the .786 retracement is violated, then price will more often than not continue quickly to the next Fibonacci levels between the 1.272 and 1–618 extension. Although that is a critical part of the Shark Attack strategy, it is not the opportunity you should be looking at. To the untrained eye, it would suggest further downside when a low point is violated and further upside when a high point is violated. This is where the shark attacks. It comes out of the water with power, but once it „attacks“ it slides back into the water. Sliding back into the water in trading terms translates to a reversal. That slightly lower low or slightly higher high is a trap, in a sense. Yes, this description sounds a lot like double tops and bottoms. In a sense, it is. However, key points to remember that the general double top and double bottom discussion do not include are:

1. What the relationship is between the .786 and the extension levels at swing points,
2. Hitting extension levels like the 1.272 and 1.618 of previous swings represent „stretched“ price action and a tradabie Shark Attack reversal typically occurs around these extension levels.
3. The more Fibonacci extension levels that come together in a tight price range, the greater the likelihood for a tradabie reversal.

Rules For Buys (Shorts Are Reversed):

1. Swing point low A is identified.
2. Once a low point A is established, price rallies to form a high point B.
3. This is where it gets interesting. As price approaches the .786 retracement of swing A:B, a potential momentum trade is setting up. Basically, if price goes below the .786, it is likely to decline to the 1.272 to 1.618 extension of swing A:B. Many times, this move from the .786 to the extension levels happens very quickly. So this presents short-term momentum traders an opportunity. This opportunity is peanuts though, compared to the reversal potential.
4. Once price goes down to the range of the 1.272 to 1.618 Fibonacci extensions, it forms a shark-looking formation. It's like the shark is getting ready to take a bite out of any short traders at this new low level as price reverses from these extension levels and rallies significantly to the upside. Go long on a trade above the previous bar high.
5. Initial stop below the Support FibZone.
6. The first objective on this trade is the .50 to .618 retracement of swing B:C.
7. The next objective is the 1.272 extension of B:C Once this price level is hit, begin trailing a stop to the previous bar low on the rest of the position.

Shark Attack Fibonacci Trading Strategy Long Setup:

1. Low point A is made.
2. Once a low point A is established, price rallies to form a high point B.
3. Price goes below 19,20, which is the 786 retracement. This presents a short momentum trade opportunity down to the 1,272 to 1.618 extension of swing A:B. In two bars, SMH hits 17.83 for a quick potential profit of a little over 1 point.

Once price hits the 1,272 to 1.618 extension of swing A:B, we have a Shark Attack pattern in full swing. With a new low established, the shorts are in control, or they think that's the case, until the shark takes a bite out of them.

Shark Attack Fibonacci Trading Strategy Long Result:

4. A long trade is initiated at 18.45 when we get the first price bar to go above the previous day's high after hitting our Fibonacci extension levels. 5. The initial stop loss order is placed just below the 1.618 extension level around 16.80. 6. The first objective on half of the position is between the .50 and .618 retracement of the high point В to low point C. 7. The next objective is for price to hit the 1.272 extension of swing B:C. This level comes in at 22.54. As the stock makes new highs, I move the stop up to the previous bar's low. In this case, we are stopped out at 22.35.

Shark Attack Fibonacci Trading Strategy Short Setup:

1. An up trend is in place as the stock forms swing point A.
2. Once a high point A is established, price declines to form a low point B.
3. Price goes above 63.85, which is the ,786 retracement of A:B. This presents a long momentum trade opportunity. In two 15-minute bars, EBAY trades up almost .30 points without looking back. Once price hits the 1.272 to 1.618 extension of swing A:B, we have a Shark Attack pattern in full swing. With a new high established, the longs think they are in control. Unfortunately they are buying in shark-infested waters.

Shark Attack Fibonacci Trading Strategy Short Result:

4. A short trade is initiated at 64.01 when we get the first price bar to go below the previous bar's low, after hitting our Fibonacci extension levels. 5. The initial stop loss order is placed just above the 1.618 extension level around 64.50. 6. The first objective on half of the position is between the .50 and .618 retracement of the high point В to low point C. In a situation like this when using intraday charts, I will sometimes not take profits and just wait for the 1,272 extension level. 7. The 1,272 extension of swing B:C comes in at 62.98. Once price hits this level I start trailing my stop to the previous bar's high. As the stock makes new lows, I move the stop down to the previous bar's high. In this case we are not stopped out at the end of the day, so I close the position because the trade was based on a 15-minute chart. So, the short was covered around 62.50 for approximately a 2-point profit intraday.

This looks a lot like a double top/double bottom strategy. Is that what you are defining?

In theory, yes, the double tops and bottoms can make slightly higher highs or slightly lower lows. I suppose you could look at this as a specific type of double top or bottom with a specific Fibonacci target completion point for the second peak/trough between the 1.272 and 1.618 extension levels.

Could you explain exactly why you call it „shark attack“?

Let's talk in terms of a Shark Attack short setup. When you look at this pattern as it is forming, price establishes the first high point. Then it reverses in the opposite direction to the downside. This gives „hope“ to the early reversal traders looking for a nice downside move. However, when price returns to the previous high and makes a slightly higher high, then the early reversal traders typically get stopped out and are forced to buy to cover their short position. Not only do early reversal traders get stopped out, but this pulls new trend followers into the game as a new high is established. This influx of long order flow creates momentum and will typically push price to a Fibonacci extension level between 1.272 to 1.618 of swing A:B as we defined earlier in this chapter. Many times this is the „last gasp“ exhaustion move before the real change of direction occurs. When you look at a chart this price movement takes the shape of a shark head with its mouth open. Basically, the shark is „attacking.“

As a Shark Attack pattern completes, are there any specific characteristics about the FibZone that one should look for?

Multiple extension levels fall into this FibZone from various low to high or high to low swings. Specifically, multiple levels of the 1.272 and 1.618 ratios. When four or more extension levels come together, there is an extremely high probability for at least a short-term tradable reversal.