My Fibonacci Extension Bread and Butter Trade Part 5 – Entry Filter

In the evolution of this trading style the one part that kept giving me issues was entries.  Specifically an entry filter.  Now when I had a 1:400 leverage with forex it wasn’t that big of a deal (until I over-traded and busted my account).  I was trading small lots for the size of my account so I could afford to get in early.  But the longer I traded the more I realized there had to be a better way.

Sure I would miss out on some moves.  But the bigger issue where the big moves that went against me.  If I could have waited to get in then that would have made me much more in profits than the small moves I would have missed out on.  As always I wanted something I could understand that I trusted.  After testing moving averages, trend lines, oscillators, and Andrew’s Pitchfork I believe I found what works for me.  Simple trend lines for my entry filter.

My Robinhood Referral

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My Robinhood Review:  https://evancarthey.com/review-robinhood-trading-service-with-no-fees-part-1/

My Custom Trend Line

I draw trend lines in two ways depending on the pivot point levels.  The first is you simply take the lower to the mid pivot point and draw the trend line.  Bam, done.  The second is when you have a reverse pivot point level.  You take the opposite sides of the pivots and draw then line.  Next, I bring it to the opposite channel pivot point.  Here are some examples of the two ways I draw the trend lines:

Here it is standard pivots used and the trend line is easy to draw.  I labeled them 1 and 2 to show where they are drawn from.  Simple.

Trend Lines When Using Reverse Pivot Points

When I use the reverse pivot points I first draw the trend line using points 1 and 3 of the reverse pivot point levels.  I highlighted in blue to show the reverse pivot points.

Next I move the trend line down to the bottom pivot point.  Then  you have your trend line when using reverse pivot points.

One Thing to Keep In Mind

Do you see how price went outside the trend line before it broke the pivot point level highlighted with the blue triangle?  When that happens I move the trend line over to the furthest move until price breaks out of the pivot level.  So instead of the above picture, you get the new trend line placement of the picture below.

This is very important to keep in mind because it has saved me from getting in too early.  That, in turn, makes me more money.

Entries With The Trend Line Break

I used to enter trades blindly when the price hit certain Fib extension levels.  That was my only entry filter.  This worked great for short extensions but was a pain for major moves.  Now I enter when price breaks the trend line.  And usually, I only enter if the price is north of the 161.8% Fib extensions level.  Here are a couple of charts showing where I would have entered.  The orange circle is the entries.  If it is a short trade then the bottom of the gray box is the exit level.  If it is a long trade then the top of the gray box is the exit level.

Charts Where I Entered

Here are a couple of charts of trades I am currently in or recently took:

Does This Entry Filter Work All of the Time?

This entry filter does not as far as getting you in at the exact top and bottom.  But what it does do is that it helps me to wait and not jump in earlier than I should.  If it saves me from entering too early only 50% of the time then it has made me a ton of money.  With my trading style that is one issue, the trend line break has helped me extremely well.  Getting in too early used to be an issue.

Do I wish I knew of a way when the price would reverse every time?  Of course, I do and I will keep on looking until I find it.  Until then I am currently using this entry filter for my entries using the trend line break.  They have helped me very much.  This will continue to evolve as my trading style evolves.  One step at a time and each time I become a little more profitable.

Parts 1 -4

Here are parts 1-3 for my Bread and Butter Fibonacci Trade:

• Part 1 – https://evancarthey.com/my-bread-and-butter-trade-part1/
• Part 2 – https://evancarthey.com/my-fibonacci-extension-bread-and-butter-trade-part-2/
• Part 3 – https://evancarthey.com/my-fibonacci-extension-bread-and-butter-trade-part-3-exits/
• Part 4 – https://evancarthey.com/my-fibonacci-extension-bread-and-butter-trade-part-4-using-correct-pivot-points/