Trading on Fibonacci retracements and extensions, Joe DiNapoli style
Joe DiNapoli-style Fibonacci retracement levels and extensions should be considered only as a single system. Using each tool separately will only give partial results.
DiNapoli method
Regarding the correction levels, it should be said that he left only 2 levels in his methodology - 38.2% and 61.8%. The level 50% was missed. In our opinion, it is uses minimum levels solely for entry purposessince it doesn't matter if you enter on a pullback of 61.8% or 76.4%, all the same stop loss behind the beginning of the wave (or "reaction" by his definition). In the end, the grid of corrections looks like the figure below. In principle, knowing his entry methods, this grid will be enough!
The extensions were also spared the unwieldiness - he left only 4 levels:
- COP - The contracted target point, shortened target point = 61.8%,
- OR - objective point, target point = 100%,
- XOP - expanded objective point, expanded objective point = 161.8%,
- SXOP - super expanded objective point, super expanded objective point = 261.8%.
"DiNapoli's Reaction Number
In our opinion, the most attractive thing about using expansion grids is that DiNapoli took into account the amount of correction and sets the standard grid not from the beginning of the impulse wave, but from the end of the correction, which we see great merit and common sense in it.
Beginners often stretch the grids without knowing which wave and why, so their charts often have a lot of levels and you can't make out what each of them means. In order to understand which wave (or "reaction") each grid belongs to, and consequently, what the targets (for the expansion grid) it gives mean, DiNapoli introduces the concept of "reaction number". Below in the figure is a cheat sheet, which will help you know what each particular grid is for and what its levels or clusters of levels of different grids provide. Also here are examples of clusters of levels, which have worked out and which are currently still in effect.
And below is what we think is the most complete example of where there is valid correction grids for larger order sweeps, and a grid of expansions from the waves that go against the old trend. The accumulation of correction levels and expansions from different grids is, as a rule, good purpose - powerful resistance In our case.
