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How to use Fibonacci levels in Joe DiNapoli style

Fibonacci retracements and expansions in Joe DiNapoli style, or simply – DiNapoli levels, should be considered as a whole system. Neither element can be viewed in isolation. Below is a concise summary of how to use Fibonacci levels in trading in DiNapoli style.

Of all the available retracement levels (.236, .382, .50, .618, .764) J. DiNapoli has chosen only 2 – .382 and .618. In my opinion the choice is such because the two levels are used for entries, and it doesn’t matter which one you enter at – 61.8% or 76.4% - in both cases your protective stop will rest below/above the beginning of the wave (or the reaction). You can see how the corrective fib-nodes look like on Fig.1. And knowing DiNapoli entry techniques these two levels are more than enough.

Figure 1. Corrective fib-nodes

The number of expansion levels is also not so great. The author uses only 3 of them, and one more – the super expanded objective point – was added later by other traders using his techniques.

  • 1. COP - contracted objective point = .618 of the length of wave A measured from the end of corrective wave B;
  • 2. ОР - objective point = 100% of the length of wave A measured from the end of wave B;
  • 3. XOP - expanded objective point = 1.618 of wave A measured from B;
  • 4. SXOP - super expanded objective point = 2.618 of wave A measured from B.

The most attractive and logical point in applying these particular expansions is that the length of corrective wave also plays its role – all the measurements start from the end of the corrective wave B. I believe this is a very logical and reasonable technique.

Neophytes to currency trading often calculate expansions and retracements of the waves the role and place of which is vaguely understood. To bring some order to the calculations Joe DiNapoli introduces the term "reaction number" which gives its specific corrective Fib-nodes. Below is a screenshot that shows reaction numbers and their respective Fibonacci expansions. Thanks to the reaction numbers you will know what each expansion point means and where it derives from. Also you can see areas of "dating" – where expansions off various reaction numbers fall into one area, at least approximately.

The last screenshot shows all the actual Fibonacci retracements, expansions and the areas where they intersect, giving strong supports and resistances.

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