Long Term Trend

Review the timeframes beginning with the longest and identify the long term trend. Using rectangles, highlight the trend reversal line’s, on both Fibonacci and Line charts. The trend reversal line should ideally have at least 2 hits if possible. The rectangle height cannot be too large and has a limit of 200 pips.

This rectangle is referred to as the Trend Reversal Zone [TRRZ].

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Short Term Trend

Now reduce the timeframe until you see a defined trend that bounces the Long Term TRRZ’s. Overlay a Fibonacci retracement and identify the fib level that was most recently tested, this is known as the Trend Break Point [TRBP].

Using the TRBP as a guide, highlight the short term TRRZ. The rectangle size should be restricted to a maximum of 100 pips.

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Micro Term Trend

Now reduce the timeframe again, until you see a defined trend that bounces the Short Term TRRZ’s. Overlay a Fibonacci retracement and identify the fib level that was most recently tested, the TRBP.

Using the TRBP as a guide, highlight the micro term TRRZ. The rectangle size should be restricted to a maximum of 50 pips.

Summary

With the chart now containing the overlays that detail the trends, you are better informed to decide appropriate places to enter the market. It is important to restrict entries to the TRRZ’s.