The Chameleon : Simple Yet Powerful EA

User Manual of Chameleon EA

The Idea and The Importance of FIBO Levels in Intuitional Trading Algorithms

How institutional trading algorithms take targets? How do they decide if the current price of an asset cheap or expensive or how they decide when to enter or exit the market?

There are several answers to these questions. One answer is Institutional trading algorithms  often incorporate Fibonacci levels as a part of their strategy.  Because these levels can serve as key points of potential price reversals and potential price targets. 

Therefore, it is important to correctly locate and use FIBO levels on charts to have an idea on where the bulk of institutional algorithms show up or flat the position. When used correctly, FIBO levels give us a predictive power. I will continue this with an example:

Take the very recent case on December 18, 2024, the FOMC day. There was significant sell of followed by the FOMC rate announcement.

Any eye could easily spot from the graphical examination where the price found its footing. Just draw a FIBO line from daily high to daily low. 

At this point, you should expect, if any price reversal attempt starts, the institutional algos are likely not going to stop until FIB 50% level where they flat the positions. If you open a long position in an expectation of a price reversal, then you don't need to exit prematurely from this position.

As you can see from the graph, price reaches 50% FIB before liquidation of long position starts. So why 50% why not any other price level?

Let's share a pro trading tip here.

When you decide to buy something, you consider if it is cheap or not, don't you? So institutional algos do the same thing so does the Chameleon.

1- The EA evaluates if the current price is cheap or expensive using FIBO level.

2- If the price is below 50% FIBO level, the algorithm translate it as , the current price is in discounted, so the EA consider buying in the location where exists liquidity.

3- If the price is above 50% FIBO level, the algorithm translate it as , the current price is in premium, so the EA consider selling in the location where exists liquidity.

Therefore FIBO levels are important and Chameleon EA uses FIBO levels to conduct trade operations.

The Recommended Use of The Chameleon :

You do not need a years of backtest to work with EAs. 

My suggested use is the EA captures the price dynamics of a recent period - which is more important. For this, you can prefer 3 month or 6 month optimization periods.

1- You optimize for the past 3 or 6 months with "every tick based on real tick " and "variable spread"  options and

2- Make 1 month forward and 1 month rewind tests. Rinse and repeat it on every week or every 2 weeks or do it monthly

Your risk will always be controlled.

Example:

If today is Jan  01, 2025,

Run an optimization from June 01, 2024 or September 01, 2024 to November 30, 2024 and make a backtest for May 01, 2024 - December 30, 2024.

By doing so, you also largely avoid having a history reading EA because you will have 75% learning period and 25% out of sample tests. 

Choose the set provides optimal risk return together with the controlled period (optimization period) and with the uncontrolled period(forward-rewind test).

Enjoy this free EA and don't hesitate to ask me any question.