Fibonacci Based Moving Averages Indicator

Fibonacci Based Moving Averages Indicator

Fibonacci Based Moving Averages Part 2 is a trading tool that uses moving averages based on Fibonacci ratios. It is an excellent trend detector. It goes well with trend-based strategies and technical tools.

Many traders use the moving average to identify and ride the trend. On the other hand, Fibonacci ratios appear in nature, including markets. Traders use the rations to identify areas of interest that act as support and resistance levels. What happens when you combine the moving average and the Fibonacci technical indicator? You get an accurate Fibonacci Based Moving Averages indicator for identifying the trend and ideal entry and exit points.

The indicator consists of five Exponential moving averages based on Fibonacci ratios. The best part is that you can use this indicator to trade any instrument, but higher values work well on higher time frames.

Fibonacci Based Moving Averages Buy and Sell Signals
Buy when the short period moving average lines cross above the long term lines.
Sell when the short-term moving average line moves below the long-term lines.
Exit Strategies
Place a stop long below the recent swing low or above the swing highs.
Place the take-profit target above the next resistance or support zone.
Fibonacci Based MA Trading Example

The chart shows the price movement for Great Britain against the US dollar. The short period moving averages are slanting downwards below the long time EMAs. This is an indication of an ongoing downtrend. You should therefore look to enter or add short positions.

Conclusion
Without a doubt, the Fibonacci indicator is one of the best technical tools. Using Fibonacci ratios to calculate the moving averages is perhaps one of the best innovative trading ideas. You definitely need to try it out.