Fibonacci Retracement for Options Trading

President Trump made trading great again. His tweets last Sunday pushed the futures lower and brought volatility back into the market. The VIX, the market’s fear barometer, hit levels we haven’t seen since January.

So far this year, stocks have been grinding higher…however, with this added volatility it gives us more options in terms of which stocks we can trade.

Of course, as market conditions change, so should your approach to position sizing and risk management.

For example, one pattern that we’ve seen work well in the Millionaire Roadmap chat room is the Fibonacci retracement.

And you know what, you can take stock and option trades based off the setup. In fact, Nathan Bear, has been teaching MRM clients how to develop real trade ideas from it. And the results thus far have been nothing short of remarkable.

As you may already know, it’s also one of my favorite patterns to trade and one I’ve written and done lessons on before in the past.

However, it’s better you get this lesson from Nathan.

(Client turned mentor, Nathan Bear took a $37K trading account and transformed into nearly $2M, he teaches every day in MRM, click here to join)

Why?

Because I think you’ll find better opportunities with the type of stocks, he trades. For example, when markets get volatile, penny stocks and low floats get less active ironically.

The reason is that traders have a greater selection to choose from. Simply put, catalysts are everywhere.

That said, Nathan actually constructs options trades from the Fibonacci setup. Many traders prefer options in this environment because it allows them to limit and control their risk.  

There Are Multiple Ways to Use the Fibonacci Retracement Tool.


It’s not Friday, but we’re going to be talking about Fibonacci retracements today. Now, there are multiple ways to use the Fibonacci retracement tool. If you’ve been following my trades, you’ll know that the Fibonacci retracement is one of my favorite tools to use.

If you recall, here’s what I’m looking for with the Fibonacci retracement play:

  • Stock has a strong move higher.
  • Thereafter, the stock starts to pull back.
  • Once we see the pullback, we draw the Fibonacci retracement from the swing low to the swing high… then we find a Fibonacci level where the stock could bounce from.

You can learn more about the way I use Fibonacci retracements here and here.

Now, I taught one of my former students (Nathan Bear – who turned $37K into 7 figures) how to use that pattern… and now he’s developed a way to use it to help him consistently generate winners.

That said, let’s see how Nathan Bear uses the Fibonacci retracement tool.

Using Fibonacci Retracement to Trade Options


Remember, with the Fibonacci retracement tool, we’re looking for a stock to have a strong move higher. Thereafter, you identify a swing high and a swing low and draw the Fibonacci retracement tool.

Now, Nathan Bear likes to use this tool, and the Fibonacci tool was one of the signals that let him know to get into the trade.

Here’s a look at the chart in Wingstop Inc (WING) Nathan was looking at.

(Nathan Bear uploaded a Fibonacci retracement lesson for Millionaire Roadmap clients, if you want to learn how he uses this tool, click here to get started).

Now, if you notice the chart above, you’ll see some horizontal lines. Well, those are Fibonacci retracement levels. Basically, Nathan found the swing high and swing low, drew the Fibonacci retracement to connect those levels… then the trading platform did the rest.

Notice the annotation in the screenshot above. You’ll notice the 50% and 61.8% retracement levels. Typically, when a stock gets between those levels, it’s a good spot to consider buying because chances are it’ll bounce from there… and break above the previous high.

Additionally, if you look at the bottom of the price chart, you’ll notice some bars. Nathan paired Fibonacci levels with the TTM squeeze indicator (which you can learn more about here). What he was looking for was the stock to bounce off a Fibonacci level (which it did), and the TTM squeeze indicator to break above the zero-line.

You see, the Fibonacci retracement level gives him a price level to look to buy stock or options… and the TTM squeeze breaking above the zero line lets him know the stock could run higher and gain momentum.

Once he saw those indicators align… he bought options and let clients know about the trade in WING.


Fibonacci Retracement for Profit Targets


Now, if you didn’t know, you could also use Fibonacci retracement tool to let you know where to take profits… and where the stock could run to.

To find your targets, you’ll need to add the Fibonacci levels (127.2% is what Nathan likes to use).

Now, once you draw the Fibonacci retracement tool from the swing high to the swing low (as shown above)… you’ll get the Fibonacci level to let you know where to take profits. If you look at the top-most green horizontal line, that’s the 127.2% Fibonacci level. So if the stock gets to that level, Nathan Bear will take some profits off the table.

Well, the stock reached his profit target… and he let clients know about his moves in WING.

(If you want alerts like these in real-time, click here to learn more.)

As you can see, the Fibonacci retracement is a powerful trading tool. Remember, there are multiple ways to use this tool, and it’s not one size fits all. Now, if you want to learn more about how Nathan Bear uses the Fibonacci retracement tool, click here.

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