Forex Trading Strategies for Beginners – Complete Guide

Not sure if anyone is a fan of fib retracements but today's price action is in line with this mathematical model. bounced right off the 23.6% retracement. we should see price action headed towards $35.6/$44.09
today's action is in line with fib retracement $BBBY

I'll start this with something everyone can easily follow and as we go on some more complex stuff.
Bolds for skimmers
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All that's required to plan important levels on the way through all of the 2021 rally is to draw a fib from the high to low of this rally. The levels this gives were useful in the first instance and we're testing the second one now with a strong initial reaction.
https://preview.redd.it/c1dczzz35u091.png?width=1847&format=png&auto=webp&s=4e43cc2a504007dc80a194555007cd1bc24ef102
The breaking of these fib levels will usually signal further downside and rallies to retest the previous fibs will often end when retesting and begin to drop to the next fib.
https://preview.redd.it/2g0ivkxq5u091.png?width=1847&format=png&auto=webp&s=b15334c730539a484f0fe168061a3e4ac94a4f43
If we break under the 38.2 fib the chances of us sooner or later getting the the 76 fib without a new high is much more likely.
Simple plan:
If fib levels are breaking, bias is towards the next fib level. For as long as the downtrend remains intact, the market will not give up broken fibs.
Shorts into retests of can be great trades but get out quickly if it begins to trend against you. For simple stop loss rules, using about half way through the previous fib zone. There are better ways to place fibs using simple price action rules but this generic rule would usually be useful in keeping you in a down trend and taking you out of a reversal.
I consider shorting a retest of the 23 fib (The one that would hit if we rallied now) riskier, for reasons I'll explain below - But bears taking the 38.2 fib off of any sort of rally (And we've had a sort of rally) would give strong trading bias to the 50 fib whilst the market was unable get back above the broken and if the 50 fib hits buying any retests of previous fibs has a lot of potential.
If you're shorting, it's a very good idea to lighten up positions into the fib levels. A lot of the time these will produce big bounces that would eat up all your profits. It's better to get out and see if you can get a better price on a bounce. If the fib breaks with no bounce, usually it retests and you can often enter the market short again at the same price you exited - sometimes better.
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https://preview.redd.it/pxssqvfv7u091.png?width=1847&format=png&auto=webp&s=2bfd0ffa4e245e0ffede6fbac20bbe51131d42c4
If you're an overall bull, or someone with a bullish portfolio wondering if there's anything you can do:
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Put these fibs on your chart now and wait to see if they have what would be above expected reactions. Does the market seem to respect these fib levels on the way down? Here's an idealised path of obvious reactions.
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https://preview.redd.it/i1cu5uefau091.png?width=1841&format=png&auto=webp&s=7d748e91f57e866d921fc2815a931f2277458163
If you see a notable number of reactions accept there's a very reasonable case for the 76 and 86 fibs being important. If the market proves it, accept it. It might just happen as would be implied. If the 76 and 86 fib, although there are often sharp rallies, price is usually going to the 127 fib before it's going back up any substantial distance of the overall fall.
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That'd be 1515 in SPX.
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I put forward this theory of the 76 > 127 break trade while the market was rallying. And if you check this trade against all the SPX breakouts to new lows, you'll find this trade has proven itself to be useful on the action so far. https://www.reddit.com/thetagang/comments/uuel9q/lets_look_at_some_ways_to_decide_when_to_cut/
If all the fibs break, there will likely be a spell of choppiness involving major short term bull and bears moves but ending up all inside of an overall small range relative to the fibs. During that time there will be plenty opportunity to take actions that would lighten the blow of this style of capitulation crash and the market would have done many things to hint to you that it's probable.
A macro bull buy setup would fail upon a breaking/rebreaking of a 86. This would quite likely lead to a big flush out event that would involve capitulation periods ending not before 1515, as per normal failure rules of this pattern.
https://preview.redd.it/ga6d2wicbu091.png?width=1844&format=png&auto=webp&s=325915bc5419a5361b922ecbf5d42c7f6db32ce8
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76 fib is waaay down and it really would not be a bad idea to be thinking about what to do right now. I think waiting until a 76 fib break to take protective action on a portfolio could prove to be a mistake. A clean breaking and retesting of the 38.2 fib will very often go to the 76. Reactions on other fibs to come are common, reversals less so.
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The 38.2 fib
In a downtrend the 38.2 fib is often good for a bounce but is quite easily broken in the next run(s) at it.
However, SPX is still very much in a technical macro uptrend. It's way above the last low and would remain in a technical uptrend all the way up to the 76 break.
Regardless of your opinion on how important current breaks or, or what will come next - right now it's obviously a strong uptrend as per the rules of a trend holding higher lows. Can retrace to 3300 and still be in an uptrend in the macro using basic trend following rules.
In an uptrend, what we sometimes see from 38.2 retracements is the market boom off them and spike out the previous high. This is the Elliot wave 5, and it's impressive. When big wave 5s happen they are impressive. It'd give a forecast of a strong move looking something pictured below.
Were we to be at this point, shorting into the rally off the fib would turn into quite literally the most painful trade ever.
Want to be a careful bear and a calm bull at this fib. It might be where a very big decision is made. There's a good case for it going either way.
https://preview.redd.it/ov03iarnfu091.png?width=1853&format=png&auto=webp&s=38737a5187e574e2938106bb29031b2511899c6d
The 38.2 fib holding or breaking I think is critical to the success or failure of a short squeeze trade plan. I'm currently long because I know just maybe a big short squeeze might happen and also I think even if not a lot of the time we tag 23 and I get to make protective decisions there, by the time highly significant bear retracements are hitting for the big risk zones, trades are up and stops can trail.
Once underway a bull move out of the 38.2 fib should give up no ground. It should consistently trend through resistance levels without too many major reactions and as it gets deep into the move start to really evolve into some wild with huge 1 minute bars shooting up. It would be bull porn, and the mania that would be in the market if that did happen would be a spectacle. And uncomfortable short.
One more time with the bull porn - I'm not just drawing scribbles. Often there's a strong relationship in the correction and the impulse leg to follow. If one is known (And if we make a low, by the time we're at the high it's known, and I'll speculate now and see where it gets me) then the other is strongly implied and we can map out a lot of the time how a bull move would form.
https://preview.redd.it/rytna77iiu091.png?width=1840&format=png&auto=webp&s=3019b177f6f3badacfdc0b524f3fda7e5b597627
Bearish trade plans are contingent upon the 38.2 fib breaking, which is 3800 in SPX.
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Short squeeze theory I think would fail soon. It's now or never for the Last Dance. There's a perfectly good case to be made for the short squeeze having already ended. That 2021 was the short squeeze. Market dropped 30% and then extended to the 220. That may well have been it. The big yr long short squeeze.
https://preview.redd.it/4wtxr71eju091.png?width=1847&format=png&auto=webp&s=a9c2b5feea958e1d8c7e540a68fb220e9fe35517
This is atypical of rallies of this size (A decade). Usually they go out with a fanfare and there's a clear part at the end of the trend where you can see there was a vicious whipsaw that was over quickly. Here price might have just taken out the 161 and tagged the 220 to complete a pullback to the 12- 161 zone and then continue to the 261 fib. Would be basic trend continuation pattern. That has to fail here or the implied move is a strong bull one.
If and when the big bull patterns start to fail, that's when it will become profitable to be consistently bearish until we are substantially lower. During this stop I've proposed points it may be good to get some bullish positions. These have generally been into the lows of the range with updates on trailing stops/exits. While having the obvious losing trades net results as a bull have been good in 2022.
But no rip. Up to now some really good bull patterns have formed, made dummy moves that looked good at the time and over and over taken us into a new low. A lot of the time when I take positions they're going into profit but after a little run the bears are quickly crushing the bulls again and soon I'm getting stopped out at a profit, breakeven - or wishing I'd opted for one of those two options.
And soon we're going to test some really big and interesting bull signals.
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The Butterfly Inflection Point
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The bull rips out of the butterfly in an uptrend. A breaking of this bullish pattern I really would consider green light for bears down into the following fib levels.
https://preview.redd.it/2c2t0keslu091.png?width=1856&format=png&auto=webp&s=3b493e205a306ce9b7664cf42db75a65d6c7b58d
The breaking of the harmonic patterns is incredibly important in trend decisions. If we're going to see a breaking of the harmonic pattern I think it will be preceded by action like this.
https://preview.redd.it/pwkiblm8mu091.png?width=1860&format=png&auto=webp&s=1949027d65e2dbae0920301f78f9a38bd28b6181
I often say I think harmonics that will hold tend to crash into the fibs and ones that will break tend to put in a false bull move before it. In a harmonic that holds the action is scary all the way and in a break it pretends to reverse first a lot of the time, and then crashes through (And it is a crash relative to recent PA - since we're now looking at big charts, we're talking about a proper crash setting up off 4000 - 4100 retest.
I consider this risk of a true market crash starting from a retest of 4000 - 4100 and failure there to be far from nominal. This is an area to think about protective decisions as a bull and certainly fair game for speculation as a bear.
The scariest thing that can happen in the market now is maybe, nothing. We just slow down and kinda drift sideways for a while. Starts to look a bit bullish and then later turns into a hard break of the lows. If that sort of action was to happen, I'd start to think about the harmonic break, a lot. Macro long bias would be very quickly ditched if we have signals of the butterfly failing at 3777. I consider under here unacceptable capitulation risk as a bull.
You can look for this butterfly failure in tops like the SPX 2007. What I've drawn is a fair example of how these will often be if they set up. Now ... imagine we also had some other simple zonal based strategy that may imply the same move and has easy trade management rules. That'd be handy.
https://preview.redd.it/94wn0rmbou091.png?width=1844&format=png&auto=webp&s=b73c7c9bf840299bc8efeac1eac360f068afa10f
If we make a low here and this move is what forms, the bull market has definitely failed as per various definitions and it down-trending down to at least the deeper fib would be highly likely.
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https://preview.redd.it/lt2uodduou091.png?width=1844&format=png&auto=webp&s=7309caee091e205b01653019239d959bf83fbdf7
From there we're going to see sharp rallies a lot off the fibs but these just retest previous breaks and go lower.
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Summary
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Short bias if break/close under 32.8 fib (3800) target 61 fib (3300).
Prep for capitulation crash if bulls can not defend the 76 fib (2825).

Tesla's move today in the intraday, the gap up from Fridays' close, and then the pullback right past the open past the initial half-hour, was a nice measured move coming down to Fib support before appearing to gather some momentum to the upside.
TSLA 5D15Min chart