S&P 500 ‘Buy’ At 100% Fibonacci Retracement Level
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Here’s a potential S&P 500 trade setup to demonstrate using one of my favourite technical analysis tools, Fibonacci retracement.
Trade Setup
- 1-day timeframe for a swing trade
- Price hit 1 (100%) Fibonacci retracement level
- I’m bullish on the S&P 500, so I entered a long (buy) position
- I set my take profit at 0.5 Fibonacci level
- I set my stop loss at 1.618 Fibonacci level
- I am risking 4.16% to make 3.36%
Advanced Risk Management
- I could adjust my stop-loss as the trade moves in my favour.
Alternative Trade Setup
- I could enter multiple long positions to target multiple Fibonacci levels, but this would increase my risk. As a conservative trader, I prefer to enter only one position per price level in case my analysis is 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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A tighter stop loss just below the 1.272 Fib level could definitely help improve the risk-to-reward ratio for swing trades.
It’s all about balancing risk—too tight, and you might get stopped out too early; too loose, and you’re exposing yourself to bigger losses.
Look at the price now. It has already hit the 1.272 Fib level and may bounce back from there.
If not, my 1.618 SL is still in play for this current -8% drop in the S&P 500.
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