Fibonacci Stalking is a proprietary market timing technique that can be used to enter the trading setups with tight stops, and most importantly, it can be used to procedurally test levels of resistance and support.
Before you continue further, please make sure you have read the 1-page FibStalker leaflet, which provides a high-level background information on how I look at the markets.
The concept of Fibonacci Stalking, or FibStalking, provides an effective way to think, decide and execute entries in trade setups. FibStalking has been derived through rigorous research and the collaborative work with other mentors and traders including Van Tharp, Ivica Juracic, DR Barton, David Hasley. This technique is based on the observation of how algorithms affect price when it is inching closer to the levels or areas of support and resistance, in those markets where Algorithmic Trading (AT) and Programs Trading are active.
In Modern Markets, and especially in those with very high volume, the existence and activity of classes of AT significantly contributes to price action and dynamics observable in all time frames. When you start observing the price moves and sequences of the price moves, you realize there a structure unfolds in the different time frames due to the presence of AT. This gives a clear understanding of the little-know, mysterious activity of market participants. This allows uncovering what market participants – be them trading professionals or automated algorithms – are doing or likely to do and how they may be positioned in the markets.
What the ‘FibStalking technique’ can do for you?
Combine all this information together and you can get quite a good “explanation” of price dynamics that can immensely help in successful execution, proper risk management and obtaining the optimum trading results.
Most importantly, price moves and related sequences induced by AT can also be used for tasks of unprecedented precision and effectiveness. For instance, the technique can be used to test if there is enough participation from market players to reverse price direction, near levels of support and resistance starts. This enables confirmation of the effectiveness and validity of anticipated support or resistance areas.
How the ‘FibStalking technique’ works ?
As mentioned, sequences of price moves induced by AT can be identified on each time frame. Although these moves can be of different types, they can all be identified in a procedural way. It is important to study such sequences in all time frames when price is inches a level of support or resistance (these levels are represented by the blue lines in the FibStalker method).
When studying price on the smaller time frames I look at whether the sequence of the price moves is interrupted (i.e. broken) near significant levels or areas of support and resistance. If the sequence of the price moves is interrupted there is very a high probability that market participation corresponding to players that get involved at the support or resistance area is likely to continue.
In this case it would be advisable to take a position in the market (corresponding to a long trade at support and a short trade at resistance), as this now would be considered a low risk trading idea. On the other hand, if the price sequence is not interrupted, it would NOT be advisable to take the trade as the participation at the area of support and resistance is proven to be weak, at least. In this case, the probability of the trade setup not working would be high.
The FibStalking timing technique represents an innovative way of looking at the markets and it has been extended by Giuseppe Basile, a.k.a. the FibStalker, to futures, Forex and stocks breakout methods, and currently is being extended to price/indicator divergences. In the future the technique will be extended to other trading/screening methods, like for instance, the Elder’s Triple Screen, cycles-based methods and other technical analysis methods.
I use the FibStaking timing techinque to test areas of support and resistance everyday in my market analysis. To get more information subscribe to my free newsletter and get weekly reviews to prepare for Forex and futures trading, and learn more about the methods I use and how I analyze price structure.