About this video

• Video Title: Mastering Pre-Market Design: The Sequence Model That Reveals Your True Entry Points
• Channel: ZKE
• Speakers: Not explicitly stated, but likely the creator of the channel.
• Duration: 34:55

Overview

This video provides a comprehensive guide to using Fibonacci retracement levels for trading. It covers how to correctly apply bullish and bearish Fibonacci sequences, the importance of identifying trading ranges, and how to use Fibonacci levels in conjunction with price action to identify optimal entry and exit points. The presenter emphasizes understanding market direction and provides practical examples of trade setups, stop-loss placement, and target setting.

Key takeaways

• Fibonacci Application: Learn the correct placement for bullish (bottom to top) and bearish (top to bottom) Fibonacci sequences.
• Range Identification: Understand how to identify trading ranges by looking at the most recent swing high and swing low relative to current price action.
• Premium vs. Discount: Always sell from a "premium" (above you) and buy from a "discount" (below you) to align with market direction.
• Key Fibonacci Levels: Focus on levels like 236, 382, 618, and 786, and how to trade breakouts, retests, and rejections from these levels.
• Stop Loss and Take Profit: Learn to place stop losses using Fibonacci levels or swing highs/lows, and target 1:2 or 1:3 risk-to-reward ratios.
• Market Cycles and Psychology: Understand that the market moves in cycles and that consistent application of a strategy, even with occasional losses, leads to long-term profitability.
• Confluence with Price Action: Combine Fibonacci levels with other strategies like order blocks, gaps, and price action for stronger trade confirmations.
• Multi-Timeframe Analysis: Apply Fibonacci principles across different timeframes, from one-minute to four-hour charts, to identify trading opportunities.

Here's a detailed step-by-step guide on how to trade according to the video:

Step 1: Identify the Trading Range

• Determine the relevant high and low: Look at the most recent swing high and swing low that are above and below the current price action. These two levels define your trading range.
• Understand Equilibrium: Everything between this identified high and low is considered "price action" and falls within your equilibrium.

Step 2: Apply Fibonacci Sequences Correctly

• Bullish Fibs: If the price is moving up, draw your Fibonacci sequence from the bottom (swing low) to the top (swing high). Ensure your settings are for a bullish fib.
• Bearish Fibs: If the price is moving down, draw your Fibonacci sequence from the top (swing high) to the bottom (swing low). Ensure your settings are for a bearish fib.
• Settings: Double-click the Fibonacci tool to access settings and screenshot or note them down as shown in the video for both bullish and bearish fibs.

Step 3: Understand Premium and Discount Zones

• Premium: For any given range, the area above your Fibonacci levels is considered the "premium" zone. You should look for sell opportunities here.
• Discount: The area below your Fibonacci levels is considered the "discount" zone. You should look for buy opportunities here.
• Goal: The general principle is to "buy low and sell high," and these zones help align your trades with that direction.

Step 4: Identify Entry Points Using Fibonacci Levels

• For Buys (in a Discount Zone):
  • Look for price to retrace into the discount zone.
  • The presenter suggests looking for entries at the 236, 382, 618, and 786 Fibonacci levels.
  • Retests: A common strategy is to wait for price to break a level and then retest it as support before entering a buy.
  • Limit Orders: You can also place limit orders at these key levels.
  • Specifics for Buys: The video highlights buying opportunities around the 618 and 786 levels. The 786 is particularly emphasized for strong buy signals.
• For Sales (in a Premium Zone):
  • Look for price to retrace into the premium zone.
  • The presenter suggests looking for entries at the 236, 382, 618, and 786 Fibonacci levels.
  • Retests: A common strategy is to wait for price to break a level and then retest it as resistance before entering a sell.
  • Limit Orders: You can also place limit orders at these key levels.
  • Specifics for Sales: The video highlights selling opportunities around the 236 and 382 levels.

Step 5: Determine Stop Loss Placement

• Fibonacci Level: Place your stop loss just beyond a significant Fibonacci level (e.g., below the 786 for a buy, or above the 236 for a sell).
• Swing High/Low: Use the nearest swing high (for buys) or swing low (for sells) as a reference for your stop loss.
• Using a Bearish Fib for Stop Loss: If you're in a buy trade and need to set a stop loss, you can draw a bearish Fibonacci from the recent swing high to your entry point and place your stop loss at the 50% level.
• Breathing Room: Always give your trade enough "breathing room" to account for market fluctuations and timing inaccuracies. You can trail your stop loss as the trade moves in your favor.

Step 6: Set Take Profit Targets

• Risk-to-Reward Ratio: Aim for a minimum of a 1:2 or 1:3 risk-to-reward ratio.
• Target Levels: This means if you risk $100, you aim to make $200 (1:2) or $300 (1:3). The video shows examples of setting TP based on this ratio.

Step 7: Incorporate Price Action and Confluence

• Gaps and Order Blocks: Look for gaps (fair value gaps) or higher timeframe order blocks that align with your Fibonacci levels. These can act as "gravitational pulls" for price.
• Inducers: Identify levels that act as "inducers" – areas where price is likely to react and move. These often align with Fibonacci levels.
• Multi-Timeframe Alignment: Use higher timeframes (like 4-hour) to identify the main ranges and then drop to lower timeframes (like 15-minute or 1-minute) for precise entries.
• Market Structure: Pay attention to whether price is breaking lows or highs, and how this relates to your Fibonacci levels. For example, a failure to break a low might signal a buy opportunity.

Step 8: Manage Your Trades and Understand Market Cycles

• Consistency: The market moves in cycles. Apply your strategy consistently.
• Probability: Focus on putting the probability in your favor rather than just winning every trade.
• Accept Losses: Not every trade will be a winner. If a trade hits a stop loss, analyze if it was a valid trade setup based on your rules. If it was, accept the loss and move on.
• Scalping: On very low timeframes (like 1-minute), you can scalp for quick 1:2 or 1:3 targets.
• Re-entries: If a trade hits TP, and price moves back to a favorable Fibonacci level or structure, consider taking another trade in the same direction.

Example Trade Breakdown (as shown in video):

1. Identify Range: A swing low and swing high are identified.
2. Apply Bullish Fib: From low to high.
3. Wait for Retest: Price drops into the discount zone and retests the 786 level.
4. Entry: A buy entry is taken on the retest of the 786.
5. Stop Loss: A stop loss is placed below a relevant swing low or using a bearish fib's 50% level.
6. Take Profit: A 1:2 or 1:3 take profit target is set.
7. Result: The trade hits take profit.

Key Mindset Points:

• "Buy low, sell high."
• "Understand direction because you can have a great entry but price is already in a premium and you're trying to take a buy."
• "It's not about winning and losing, it's about probability."
• "You want to do what's sustainable. You want to do what you can do consistently."
• "The way I just drew this out, does it not look like realistic price action? It does."