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How to use Fibonacci levels in Joe DiNapoli style
Fibonacci
retracements and expansions in Joe DiNapoli style, or simply – DiNapoli
levels, should be considered as a whole system. Neither element can be
viewed in isolation. Below is a concise summary of how to use Fibonacci
levels in trading in DiNapoli style.
Of
all the available retracement levels (.236, .382, .50, .618, .764) J.
DiNapoli has chosen only 2 – .382 and .618. In my opinion the choice is
such because the two levels are used for entries, and it doesn’t matter
which one you enter at – 61.8% or 76.4% - in both cases your protective
stop will rest below/above the beginning of the wave (or the reaction).
You can see how the corrective fib-nodes look like on Fig.1. And knowing
DiNapoli entry techniques these two levels are more than enough.
HIGH
RISK WARNING: Foreign exchange trading carries a high level of risk
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do not invest money that you cannot afford to lose. Educate yourself on
the risks associated with foreign exchange trading, and seek advice from
an independent financial or tax advisor if you have any questions.
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The
number of expansion levels is also not so great. The author uses only 3
of them, and one more – the super expanded objective point – was added
later by other traders using his techniques.
* 1. COP - contracted objective point = .618 of the length of wave A measured from the end of corrective wave B;
* 2. ОР - objective point = 100% of the length of wave A measured from the end of wave B;
* 3. XOP - expanded objective point = 1.618 of wave A measured from B;
* 4. SXOP - super expanded objective point = 2.618 of wave A measured from B.
The
most attractive and logical point in applying these particular
expansions is that the length of corrective wave also plays its role –
all the measurements start from the end of the corrective wave B. I
believe this is a very logical and reasonable technique.
Neophytes
to currency trading often calculate expansions and retracements of the
waves the role and place of which is vaguely understood. To bring some
order to the calculations Joe DiNapoli introduces the term "reaction
number" which gives its specific corrective Fib-nodes. Below is a
screenshot that shows reaction numbers and their respective Fibonacci
expansions. Thanks to the reaction numbers you will know what each
expansion point means and where it derives from. Also you can see areas
of "dating" – where expansions off various reaction numbers fall into
one area, at least approximately.
The
last screenshot shows all the actual Fibonacci retracements, expansions
and the areas where they intersect, giving strong supports and
resistances.
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