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An article on Currency Trading and related topics

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Use Fibonacci to Time Your Forex Trades

By: Jon Provencher

ICWR stands means Impulsive/Corrective Wave Retracement. The ICWR forex system is a set of rules that traders use to determine when to enter and exit the forex market.

The ICWR forex system is based on a combination of the Elliott Wave Theory and Fibonacci ratios. Traders have found that corrective market movements have a tendency to retrace the former impulsive market movements by a Fibonacci ratio.

So what are corrective market movements? Corrective market movements are short-term corrections that go against the long-term market trend. The major market movements in in alignment with the long-term market are referred to as impulsive market movements. Open up a chart of a major currency (say the GBP/USD) with the time frame set on daily and you will easily see the long-term trend, along with several corrective market movements.

The most common Fibonacci ratios observed in the ICWR forex system are 25%, 38%, 50%, 61% and 75%.

Many traders use the ICWR forex system with an existing entry system to assist with their exit strategy to squeeze out the maximum gain possible out of the trade. In fact many traders have found that managing a trade and determining the time to exit is even more important than choosing an entry point and direction to trade in.

The ICWR forex system is very easy to use. Simply open up a chart of a time frame you want to trade, find the former impulsive movement (in the direction of the long-term trend) and compute the Fibonacci ratios. Now enter the Fibonacci ratios on your chart. For example if the former impulsive movement UP was 100 pips, for the Fibonacci ratio of 25% you will place a line 25 pips below the high of the impulsive movement. Many charting packages come with a Fibonacci tool built in, calculating the ratios and marking the lines for you.

These Fibonacci ratios can then be used in several ways:
- go your stop loss with every impulsive movement in your favor to maximize gain and minimize risk (the 75% ratio is usually used for this)
- determine when the corrective movement is likely to finish in order to determine good entry points.

Traders often tend to panic when their trade is in gain and it begins to go against them. By using the ICWR forex system you will be ready to ride out the corrective market movements in order to squeeze out the maximum gain from your trades.

For more information on trading forex visit the link below.

Article Source: http://ezine-articles-planet.com

Jon is the owner of iBlogForex, a blog about every aspect of the Forex market including Forex trading methods and strategies.

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