If you enter at a Fibonacci level, the levels also tell you where your idea is wrong.
Two common methods
- Next level down: enter at 61.8%, stop just beyond 78.6%. Tight stop, better reward-to-risk, but more often stopped out.
- Beyond the swing: stop below the swing low (100%). Wider stop, smaller position, more breathing room.
Pro tip
Whichever you pick, size the position so the stop equals your normal risk (say 1%). A wider stop just means fewer lots.
Wick says
Putting the stop exactly on the 78.6% line. Everyone else's stop is there too. Give it a few pips of breathing room.
Key takeaways
- Stops go beyond the next fib level or beyond the swing point.
- Add a small buffer past obvious levels.
- Adjust lot size to the stop distance, not the other way round.