Fibonacci trading and cryptocurrency (Bitcoin and other)

fibonacci trading

January 01, 2018 at 8:32 am by simon

Fibonacci trading works on every time frame an instrument. It can be a great addition to trade it on bitcoin.

Finding a broker for Bitcoin trading

There are few brokers with Bitcoin and other crypto coins in their offer. For example, even XM added it to their offer.

My recommendation would be a crypto account from FX Open:

crypto-account-fxopen

You can open an account with a small deposit (starts from 10$), you have Metatrader 4 platform and cryptocurrencies offer is good.

Find all details here.

Time frame

Fibonacci trading works on every time frame but for most traders, it is better to trade on the higher time frame. Especially when you trade Bitcoin or another crypto. Trends are strong here and you can catch bigger moves on higher time frames. Few examples below.

The 4-hour time frame of Bitcoin and simple ABCD trade:

bitcoin-4hours-chart

The daily time frame of Bitcoin:

bitcoin-fibonacci-daily

The weekly time frame of Bitcoin:

bitcoin-fibonacci-weekly

As you can see, on every one of them you can use Fibonacci to catch big moves.

Of course, Fibonacci works also on lower time frames, even when you trade Bitcoin. Example of 1-minute Bitcoin time frame:

bitcoin-fibonacci-1m

You can see that it works great even on time frame as low as 1-minute. Read more about day trading bitcoin here.

Fibonacci retracement

You can use standard retracement lines:

  • 23.6%
  • 38.2%
  • 50%
  • 61.8%
  • 78.2%

We use them to spot ABC moves:

bitcoin-fibonacci-retracement

Read more: how to configure Fibonacci retracement and extension in Metatrader.

Fibonacci extension

When it comes to extensions, you can use more lines. I stick to most basic ones:

  • 127% extension
  • 138.2% extension
  • 161.8% extension
  • 200% extension
  • 261.8% extension

Just like on the chart below:

bitcoin-fibonacci-extensionYou can add more like 238.2%, 300%, 361.8% and so on. I prefer to have a cleaner chart that is why I do not put all of them.

 

Fibonacci trading strategies for Bitcoin

 

You can use all strategies described in this guide. There is one thing to consider when you chose a trading strategy. Bitcoin is trending a lot. Because of that, you can combine Fibonacci tools with some trend following strategies like trailing stop loss or moving averages.

Trailing stop loss, Fibonacci, and Bitcoin

The plan can be like this:

  • you trade with ABCD pattern
  • when a price goes near your target (extension line) you close part of a trade (take profit)
  • move stop loss higher
  • let the rest of trade run with a trend

Like in the example below:

bitcoin-fibonacci-trailingPivot lines, Fibonacci, and Bitcoin

If you decided to trade on lower time frames (1h and lower) then it is a good idea to combine Fibonacci with Pivot lines. Below you can see how daily Pivot lines and extension lines helped to select the best exit point:

bitcoin-fibonacci-pivot-lines

More about trading with pivot points here.

Ichimoku, Fibonacci, and Bitcoin

Ichimoku works best in trending condition. Bitcoin is trending so it is a nice combination of Fibonacci and Ichimoku. You use Ichimoku as a trend indicator. When you see – like below – that trend is up, you look for proper ABCD setup:

bitcoin-fibonacci-ichimoku2

 

You can also use Ichimoku as a signal to enter or exit a trade. For example, a classic break from the cloud would be a good signal:

bitcoin-fibonacci-ichimokuI would recommend to go with longer settings like below:

ichimoku_settingsIt will give you a much better picture of current market conditions.

More about trading Ichimoku here.

Summary

Trading Bitcoin is not that different than normal trading. You can see that on Metatrader chart it looks similar to other trading pairs. You can use the same tools. Just be careful when you trade on lower time frames. For most traders, it should be better to trade longer ones.

 

 

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