Replies to post #124008 on Simple's Green Room

[pennies2007]

Fib Boxes and How to Structure Them

Very good question there stk. But to answer that question, it's imperative that you look at how the fib boxes are supposed to be laid out.

SG came up with what I consider an absolutely brilliant way to use the modified fib tool in what we ultimately dubbed Fib Boxes.

But rather than use them in the traditional way, SG came up with a method that helps to identify key points in the fib boxes that can either be used as targets if you're in a current trend or possible points of reversal.

What we actually look for are "bundles" of fibs that come together...confluences from different time frames. That concept is probably one that you're already familiar with.

But this method lays out the fibs a bit differently. So here's the step by step process...I'm using UJ as an example.

#1. Go to the daily chart and find the last significant price action swing. Draw the fib tool from high to low there.

#2. Once that's done, now ask yourself a simple question...is price action trading in the upper half of that total swing or the lower half? In the case of the UJ chart, we're still in the lower half so our next fib run will extend from the lowest point to the 50% mid point. Lock in that fib box on the 4 hour chart and try to fine tune it as much as possible so that the lines on your 4 hour fib box line up precisely with the 0 and 50 levels from the daily fib box you drew in.

#3. Once the 4 hour fib box is in place, ask yourself the same question as before with reference to just the 4 hour box...upper or lower half? In the case of UJ, we're in the upper half of the 4 hour total fib box. So our next fib box goes between the 50 and the upper edge of the 4 hour box. Draw this fib box in on the hourly chart so you can fit it as precisely as possible on the 50 and upper lines from the 4 hour fib box.

That's all there is to it. Now you have a viable set of true fibs to work with as opposed to trying to figure out how to set up various fib swings from different points in price action.

Now drop down to the 15 minute chart and make your trades there. The fib boxes you set up using this method will be good for days or even weeks.

The charts below outline the steps I have listed. First chart is the UJ daily, next is 4 hour, next is hourly, and final chart is the 15 minute showing the levels close up.

The key is to watch price action...and now the zones. If you get a key zone that lines up with a fib or group of fib box levels, that helps strengthen the idea that price action is likely to stall at certain levels. But even the stand alone fib levels produce good pips as you can see on the 15 minute chart I posted.

The way I color code them for easy reference is to use the darkest fib box colors for the higher time frames. Then lighten them as you go down. So in this case, the daily is dark green, the 4 hour is yellow, and the hourly is white. That way I can tell at a glance if we're only at a white level (less significant) or at a yellow or even a green (more signficant).

So what we have when we put all of that stuff together on UJ is a very key level to watch at 98.75. Any significant break above that could easily take us to 100 which is where we have the next real confluence set of fibs. As far as just taking a long or short at a key level, that's not something we do with the fib boxes. We use them as a reference point to keep an eye on and then enter the trade based on what the price action is doing. If the candles start stalling out at a key fib or confluence of fibs, you can bet the market is paying attention to that level and is likely to reverse, especially if it lines up with an SD zone.

[pennies2007]

AU Hourly Chart with Fib Boxes

Here's a perfect example of what I just posted, stk. This is the AU pair with the fib boxes laid out exactly as I did with UJ earlier.

Notice where we're at now on AU. And notice that key top zone that has kept price suppressed since the middle of September. The zone formation told us that the market became sellers at that level. But the fib boxes tell us WHY they became sellers...huge confluence from the daily down to the hourly on the fib boxes concentrated within roughly a 35 pip zone.