Entries, stops and targets: turning a level into a trade with numbers on it
The earlier modules decided where a level is, whether it has structure, and what confirmation looks like. This module turns that into a trade with numbers on it: an entry price, a stop price, and one or more target prices, all taken from the same leg. There are three honest ways to enter at a level, each with a cost. There are three honest places for a stop, none of them on the line. And there is a ladder of targets, the old high, the 127.2, the 161.8 and the projection cluster, that gives you a reward figure to set against the risk before you click. Every example uses the same gold leg from 3000 to 3200, so that the arithmetic of a 61.8 entry, a confirmation entry and a 38.2 entry can be compared directly. The bearish mirror closes the module. Position size, which follows from the stop distance, is Module 14.
Three ways to enter
A limit entry rests at the level, usually the 61.8 or the lower part of the zone, before price arrives. It gives the best price and requires no screen time, and its cost is that it fills on the pullbacks that fail as readily as on those that hold, because it cannot see confirmation. A confirmation entry waits for a rejection close or a lower-timeframe shift as Module 11 described and buys at that close, a worse price in exchange for evidence. A retest entry waits for the second touch of the level after a first reaction and buys the higher low, which is sometimes the level itself and sometimes never comes. Most traders settle on one as their default and use another in specific conditions: a limit when the level has strong structure and the account can bear a few failures, confirmation as the general rule, retest after a violent first reaction. Write the choice into the plan before the pullback starts, not when the level is a dollar away.
Where the stop goes
Three honest placements, from tightest to widest. Beneath the rejection low with an allowance, for a confirmation entry: the low that produced the signal is the price the market already rejected, and an allowance of about a fifth of the current candle range on the leg's timeframe keeps a routine wick from removing you. Beyond the next level with an allowance, for a limit entry: under the 78.6 for a 61.8 entry, under the 61.8 for a 50 entry. Beneath the anchor low with an allowance, for a 78.6 entry or when the whole zone is the thesis. What is never honest is a stop inside the zone or on the line, because that is the price the zone's own logic says will be visited. If the honest stop is wider than the reward justifies, the trade is not available at that level on that timeframe; find a smaller leg or pass.
The target ladder
Targets come from the same leg as the entry. The first is the old high, the 100 level, which the move must reach before any extension matters and which is the natural place to take a first portion or, on a weak day, everything. The second is the 127.2 extension, the usual first pause beyond the high. The third is the 161.8 extension or the 100 projection from the pullback low, whichever is nearer, and where the two cluster, that cluster. Structure outranks all of them: a daily resistance ten dollars short of the 127.2 is where the target goes, not the 127.2. The ladder is written down before the entry with a portion assigned to each rung, and the orders are placed as resting limits, so that the exits happen whether or not you are watching and whether or not you have changed your mind. On a day when the first rung is reached quickly and the second is not, the resting orders also save you from the slow bleed of watching a winner return to the entry while you wait for a level that is no longer coming.
The arithmetic of a 61.8 entry
On the leg from 3000 to 3200, a limit entry at the 61.8 is 3076. The 78.6 is at 3043, so a stop with an allowance sits at 3034, giving a risk of 42 dollars. The old high at 3200 is 124 dollars away, about three times the risk; the 127.2 at 3254 is 178 away, about 4.2 times; the 161.8 at 3324 is 248 away, about 5.9 times. A confirmation entry on a rejection close at 3092 with a stop beneath the rejection low at 3050 risks the same 42 dollars for 108 to the old high, about 2.6 times, and 162 to the 127.2, about 3.9 times. The confirmation costs roughly half a unit of reward at each rung and buys you a trade that exists because of something the market did. Over a long series of trades, which of the two is better depends on how often the first-touch limit is stopped; the journal in Module 15 will tell you. Note too that both entries share the same stop distance in this example only because the rejection low and the padded 78.6 happened to coincide; when they do not, the confirmation entry usually has the tighter stop and the limit entry the better price, which is the trade-off in its purest form.
The arithmetic of a 38.2 entry
A shallow entry at the 38.2, 3124, needs its stop beneath the 61.8 with an allowance, at 3068, a risk of 56 dollars. The old high is only 76 away, 1.4 times the risk, which is too little for a first target, so the 127.2 at 3254 becomes the first target at 130 away, about 2.3 times. The 38.2 buys you participation in strong trends that never offer a deeper level, and it buys it at the cost of a wider stop and a nearer multiple. That is not a reason to avoid it; it is a reason to take it only with strong structure and to size it by Module 14 so that the wider stop risks the same money. A trader who only ever buys the 61.8 and a trader who only ever buys the 38.2 are both leaving part of the market unused; the plan should say which conditions call for which.
Partial exits and trailing with a redrawn leg
A common ladder on gold is a third at the old high, a third at the 127.2, and the rest trailed. Trailing is done with the drawing, not by feel. When a new swing high confirms beyond the old one, the leg is redrawn from the entry low to the new high, the old leg is deleted, and the stop moves beneath the 38.2 or the 50 of the new leg, depending on how shallow the trend's pullbacks have been by the reading in Module 5. Each new high repeats the process. The trail stays beneath the levels, not on them, with the same allowance as the initial stop. This method keeps you in a trend for as long as its pullbacks stay shallow and removes you when the first deep pullback arrives, which is usually the one that was going to go all the way. If the trail is hit and the trend then resumes, the re-entry is a fresh trade on the new leg by the full checklist, not a reinstatement of the old one.
The bearish mirror
Shorts use the same rules with the signs reversed. On a leg from 3400 to 3200, the 61.8 of the fall is 3324, the 78.6 is 3357, and a stop with an allowance sits at 3366, a risk of 42 dollars. The old low at 3200 is 124 away, the 127.2 at 3146 is 178 away, the 161.8 at 3076 is 248 away. Confirmation is a rejection close back below the level, a lower-timeframe break of the rally's last higher low, or a reclaim below the 61.8 after a sweep above the zone. Gold's habit of falling faster than it rises means bearish targets are reached sooner and partial exits should be resting orders placed at entry. Every number in the long examples has a mirror here, which is what lets the journal treat both sides as one setup. One practical adjustment for shorts is the allowance: gold's upward wicks during a down leg are often larger than its downward wicks during an up leg, so the stop above a bearish zone deserves a slightly wider allowance than the one below a bullish zone.
A minimum reward and when to pass
Set a minimum multiple for the first target and keep it. Two times the risk to the first rung is a common floor; below that, the trade needs too high a hit rate to pay, and no Fibonacci level has a hit rate you can rely on. When the honest stop and the nearest sensible target do not clear the floor, the answer is to pass, to wait for a deeper level, or to find a smaller leg on a lower timeframe where the stop is smaller and the same target is further in multiples. It is never to shrink the stop into the zone or to move the target further out. The price action course covers reading whether a leg has the momentum to reach its targets; the arithmetic here tells you whether it is worth finding out. Record every pass in the journal with the reason, because the trades you did not take at a poor multiple are as much a part of the method's results as the ones you did.
FAQ
Should I use a limit order at the Fibonacci level or wait for confirmation?
Both are honest; they trade price for evidence. A limit at the 61.8 gives the best price but fills on failures too. A confirmation entry buys the rejection close for roughly half a unit of reward less at each target but exists because of something the market did. Write the choice into the plan and use the journal to see which pays better for you.
Where exactly should the stop go for a 61.8 entry?
Beneath the 78.6 with an allowance of about a fifth of the current candle range on the leg's timeframe, or beneath the rejection low with the same allowance for a confirmation entry. Never on the 61.8 line or inside the zone, because that is where the zone's own logic says price will be visited.
What targets should I use from a Fibonacci entry?
The old high first, then the 127.2 extension, then the 161.8 extension or the 100 projection, whichever is nearer. Structure outranks all of them: a daily level short of an extension is where the target goes. Assign a portion of the position to each rung before entry and place resting orders.
How do I trail a stop using Fibonacci?
Redraw the leg from the entry low to each new confirmed high, delete the old leg, and move the stop beneath the 38.2 or 50 of the new leg with an allowance. This keeps you in while pullbacks stay shallow and removes you on the first deep one.
What is the minimum reward to risk for a Fibonacci trade?
Pick a floor and keep it; two times the risk to the first target is common. Below it the trade needs a hit rate no level can promise. If the honest stop and nearest target do not clear the floor, pass or find a smaller leg; never tighten the stop into the zone.