The reason why many traders new to using the Fibonacci retracement tool find it hard to effectively use it is because they are having trouble identifying swing points that are significant enough to be considered. This is where the ZigZag indicator comes in.
The ZigZag indicator is a great tool to use to identify swing points. If you’d backtest it, it does seem to effectively pinpoint relevant swing points. So, we will be using these swing points as a basis for measuring our Fibonacci retracement tool, and we will be waiting for the price to react at around 50% of the Fibonacci retracement tool.
Indicators:
- ZigZag
- zigzagarrows
Timeframe: any
Currency Pair: any
Trading Session: any
How to trade with ZigZag Fibonacci Forex Trading Strategy?
Buy (Long) Trade Setup Rules
Entry
- The last line drawn by the ZigZag indicator should be going up
- Use the Fibonacci retracement tool to measure the swing points from the low to the high
- Wait for price to come back at around the 50% level
- Wait for a the zigzagarrows indicator to print a blue arrow pointing up
- Enter a buy market order at the close of the candle
Stop Loss
- Set the stop loss below the blue arrow
Take Profit
- Set the take profit at the swing high based on the ZigZag indicator
Sell (Short) Trade Setup Rules
Entry
- The last line drawn by the ZigZag indicator should be going down
- Use the Fibonacci retracement tool to measure the swing points from the high to the low
- Wait for price to come back at around the 50% level
- Wait for a the zigzagarrows indicator to print a red arrow pointing down
- Enter a sell market order at the close of the candle
Stop Loss
- Set the stop loss above the red arrow
Take Profit
- Set the take profit at the swing low based on the ZigZag indicator
How to download and install an indicator?
In order to install the indicator on your MT4 platform, you need to follow these steps:
- Click on the “Download Indicator” button located at the bottom of the screen.
- Save the file to your computer.
- Extract and move the files into the MT4>Indicator folder of the MetaTrader4 software file directory.
- Restart your Metatrader platform.
- Navigate to “Indicators.”
- And select the “ZigZag Fibonacci Forex Trading Strategy” template to apply it on the chart.
Note: This indicator was developed by T. Morris. AtoZ Markets does not carry any copyrights over this trading tool.
