If you have a good working knowledge of the Fibonacci retracement lines, this will be a less challenging strategy to implement. Traders who use this elaborate strategy often swear by it and use it exclusively. When combined with other indicators, such as pivot lines, it provides a stronger signal.What is the Overlapping Fibonacci trading strategy?
You can implement this strategy during any strong market movement, be it a bullish or bearish. Let’s assume the market is trending upwards. In this case, the idea is to map two Fibonacci retracement lines. You start out by identifying three waves; an upward trend (first wave) that’s followed by a retracement (second wave) and finally the appearance of an upward trend (third wave).
You draw the one Fibonacci from the low of the uptrend to the high of the trend (the lowest wick up to the line of resistance or top of the third wave). You then draw the second Fibonacci from the low of the second wave to the highest high. The next step is to identify confluences or overlaps between the lines of the two separate Fibonaccis. During an uptrend, the level of confluence indicates a strong line of support. In a downtrend, the confluence confirms the presence of a strong line of resistance.