If you think that Reagan and Gorbachev were the ones with all the power during the Cold War… think again.
It was the guys sitting at the bottom of the north Atlantic commanding the nuclear submarines that held the real power.
With the push of a button, they could start a war that had the potential to end the world. And make no mistake, their power was absolute.
All of that power however, was absolutely useless without one critical element.
This told them everything they needed to know about the enemy, their whereabouts, and how they needed to maneuver.
There is a ‘sonar’ equivalent in every futures market traded on earth. It comes in the form of Fibonacci-based harmonic patterns. There are literally dozens of trades you can take each session using them.
Yet they are misunderstood and misused by 99% of the traders who add these golden ratios to their chart.
Profitable price action patterns millions of traders miss
Before modern sonar, there was no real way for a surface ship to protect and defend from a ‘U-boat’. The submarine, even in its early crude form, could sneak up, attack, and slip away before anyone was the wiser. In a desperate measure, the British took to smashing the periscopes with hammers on clandestine missions as their only defence.
When it comes to the age-old practice of trading Fibonnaci patterns, millions of traders take the crudest, riskiest approach to identifying entries.
They hand-draw the levels on their chart.
And why not? The price action is there. The profit is there for the taking. They know that high-probability entries are lurking just below the surface. It’s just a matter of getting in on those Golden Ratios… right?
Here’s a perfect example. Check out this ES chart below. Price makes a massive move up and you grab your Fibonacci retracement tool -- just when you think it’s losing steam. The trade concept? Very simple -- let’s get it on the reversal and/or the continuation using the ratios.
The issue? Where on earth should you enter? How on earth will you get confirmation?
And above all… exactly where are you going to set your targets and stops?
And there it is. The harsh reality facing every amateur trader who attempts to find entries by hand-drawing Fibonacci levels (of any kind) on their chart. There’s really no real way for you to know.
Why? The answer is simple. It’s the very fuel that powers trade confirmation.
How to triangulate Fibonacci-based entries in one step.
The more sonar technology advanced, the more deadly operating in the sea became — both for submarines and those hunting them. It’s the infrared detectors that are used by today’s submarine hunters to track and kill enemy subs. Thanks to forward-looking infrared, the heat signatures of big, fast-moving nuclear attack subs can be identified.
If you’re looking to hunt down Fibonacci-based price action, you need the market’s very own version of forward-looking infrared. Volume.
Without volume, it’s literally impossible to confirm exactly what kind of price action you’re looking at. This is the case when trading Fibonacci-based patterns -- or any other strategy that you may be deploying.
If you somehow think that price approaches a Fibonacci level, looks to the heavens and says… ‘let’s reverse, because it’s what nature would want’... think again. It’s volume that drives this.
And more importantly, it’s volume that provides the vital confirmation on exactly when and where you should target your entries.
Look at the same ES example from before, but this time, let’s layer in volume. Of all the times that price crosses over the ratios -- only two are really supported by volume.
If you accept the fact that it’s the institutions that are driving the market -- not the amateur traders -- then you have to respect volume when it enters the market.
For a reversal or retracement entry -- on this seven-minute chart anyway -- this means that you have to rule out the other levels… or fake-outs.
Now that you know the opportunity is there, you simply need to determine what price action pattern you’re going to trade. Fortunately, there is a way to do this without having to give your entries or exits a second thought.
High-probability harmonic pattern trades at any range
For as deadly as a submarine is, once its location is triangulated, it’s basically dead. It can’t run, hide, or outmaneuver a torpedo that’s hot on its tail. Regardless of what Sean Connery made you believe in Hunt for Red October — the kill percentage is really high once location is nailed.
The same is true when looking for Fibonacci-based price action patterns. Once they’re spotted, you should be able to enter a high probability trade.
Except there is one critical difference: You need to be able to dynamically plot them in advance -- with precise entry and exit levels. Trying to enter with the zones, or guesstimate levels that come with hand-drawn levels, won’t work.
Fortunately, there are tools that spot harmonic Fibonacci-based patterns for you as they surface on your chart. They triangulate the coordinates that volume provides, and they boil the price action down to a very specific pattern that you can easily trade.
The best part? All of the levels are plotted on your chart for you. Down to the absolute tick. Check out the ES chart below to see what they look like.
Imagine how deadly a 1980s-era submarine would be if it had underwater GPS tracking and heat mapping. Pinging blindly with old sonar, trying to guess if it’s a whale or another submarine, would seem insane.
Don’t make the same mistake when trying to trade Fibonacci-based harmonic patterns! Have these patterns dynamically plotted on your chart for you. Harness the power of volume to predict when and where you should be entering -- or if you should be entering at all.
Above all, trade with the precise targets you’re given and build your account into the global superpower you deserve.