Standard Operating Procedure (SOP) 1: Fibonacci and Pyramid method
You can utilize the Fibonacci retracement tool to strategically set buy positions by incorporating the Pyramid method. This approach involves placing multiple buy orders at key Fibonacci levels, gradually increasing or decreasing the size of each position, depending on your strategy. For example, you might set smaller buy orders at higher retracement levels (e.g., 0.1%) and larger ones as the price retraces deeper (e.g., 0.2%, 0.3%, 0.4%), creating a pyramid-like distribution of your trades. This method helps optimize your entry points and manage risk effectively by aligning with potential support levels in the market. Here’s an example for better clarity:
The Fibonacci retracement tool can also be effectively utilized in bearish markets. In such cases, you simply invert the Fibonacci levels to align with the downward trend. This allows you to identify potential resistance levels where the price might retrace before continuing its descent. For example, in a bearish scenario, the retracement levels (e.g., 23.6%, 38.2%, 50%, 61.8%) are flipped upside down, helping you strategically place sell positions or plan exits. Here’s an example to illustrate this approach:
The Fibonacci retracement tool can also be used to strategically position your take profit (TP) levels. By flipping the Fibonacci upside down—just as you would when identifying sell opportunities in a bearish market—you can determine potential price targets where the trend might reverse or slow down. These flipped Fibonacci levels (e.g., 23.6%, 38.2%, 50%, 61.8%) provide a clear framework for setting TP points that align with key resistance zones. Here are some examples to demonstrate this approach:
Both images illustrate examples of potential Take Profit (TP) areas when utilizing the Fibonacci retracement tool. The first image demonstrates TP levels for buying positions, where the Fibonacci levels are aligned with an upward trend, marking possible resistance points to exit trades. The second image, on the other hand, showcases TP levels for selling positions, where the Fibonacci is flipped to correspond with a downward trend, identifying potential support points where profits can be locked in. These visual examples provide clear guidance for strategically setting your exit points in both bullish and bearish markets.
Standard Operating Procedure (SOP) 2: Sideways/The Ping Pong method
The Sideways SOP, or what I like to call “The Ping Pong Method,” is a simple strategy for trading when the market is moving sideways (stuck in a range). The idea is to follow the basic trading rule:
“Buy at the bottom and sell at the top.”
I call it “The Ping Pong Method” because, just like a ping pong ball bouncing back and forth, the market moves up and down between a top (resistance) and a bottom (support). Your goal is to buy when the price is near the bottom of the range and sell when it gets close to the top. This method works well in sideways markets because the price keeps bouncing between these levels, making it easier to predict and trade. You can use indicators to define where the top (the premium) and the bottom (the discount).
Here’s an example of this Ping Pong method:
Standard Operating Procedure (SOP) 3: Wait
If the market is trending downward, you have two options: either stay on the sidelines or wait for the price to drop further and buy at the Discount Level—a point where the market is likely to reverse and start moving upward. The concept can be summarized as:
“Market goes down, picks you up, and goes up.”
It’s important to note that you shouldn’t rush to buy or sell immediately. Instead, place your orders in advance by queuing your position at strategic levels. This approach helps you avoid impulsive decisions and ensures that your entries align with key price zones for maximum potential gain.
The reason why the market usually goes up after the market goes down is because of two reasons:
- Everything that goes down will have to go up and vice versa
- When the market sharply goes down, people who putted their stop lost (something like a take profit but will stop your losts if the market goes down if you had a buy position) at that area with get liquidated and the candle with have a long wick, like in this example:
