[Christian Harris]

Here’s a Dow Jones trade setup I recently took to demonstrate using one of my favourite technical analysis tools, Fibonacci retracement.

Trade Setup

• 1-day timeframe for a swing trade
• Price hit the 1.272 Fibonacci retracement level
• I was bullish on the Dow Jones, so I entered a long (buy) position
• I set my take profit at the 1 Fibonacci level
• I set my stop loss at the 1.618 Fibonacci level
• I was risking 2.87% to make 2.25%

Advanced Risk Management

• I could have adjusted my stop-loss as the trade moved in my favour.

Alternative Trade Setup

• I could have entered multiple long positions to target multiple Fibonacci levels, but this would have increased my risk. As a conservative trader, I prefer to enter only one position per price level in case I’m wrong.

Disclaimer: This example is for informational and educational purposes only and should not be considered financial advice or a recommendation to buy or sell any security. Trading involves significant risk, and past performance does not guarantee future results. Conduct your own research and consult with a financial professional. The information discussed here is personal to the author and may not be suitable for all traders.

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Topic

[Adam Canes]

Hey Christian.

How often does the 1.272 Fibonacci level act as a reliable entry point in your experience?

Thanks for sharing this.

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[Christian Harris]

The 1.272 Fibonacci retracement level can be a reliable entry point, but its effectiveness depends heavily on the market context and trend strength.

In strong trending markets, it often acts as a reliable pullback zone where the price finds support before continuing its move.

However, it may not hold consistently in choppy or sideways markets.

In my example, the Dow Jones was undergoing a 9% + pullback, so I thought it was a pretty good bet [with solid risk management] to go long.

Confirming the entry with technical tools like volume analysis, moving averages, or candlestick patterns is also beneficial.

For example, a bullish reversal candle at the 1.272 level in an uptrend can signal a high probability of entry.

Do you use the 1.272 level in your trading or prefer other Fib levels like 0.618 or 0.786? 🤔📊

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[Adam Canes]

I don’t myself use fib levels but I’m interested in learning more.

So far I’ve been focusing on price action and candlestick patterns (pin bars, engulfing candles and the like) for reversals or continuations, with some confirmations on support and resistance.

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