Using DiNapoli Levels in Forex

Published at (www.mo4forex.com) My notes on the significance of DiNapoli levels in Forex trading. I recently came across a site made for and/or by Joe DiNapoli, a name I’ve heard thrown around and a name an indicator in MetaTrader4 fhat I have seen and tried out a few times in the past never really knowing what it did or the signficance it had on Forex Trading. This post is a brief outline of the things I’ve learned about trading DiNapoli levels and why they are indeed a great indicator of where price movment might reach.

This is an example of a trade I took and that I will blog about when it is over, but if you notice the three horizontal lines near the top of the chart, the green line is a Fibonnaci resistance level, the red smaller dashed line is a Dinapoli level automatically entered by the the DinapliTarget indicator, and the other red line is my take profit level. I’ve been watching DiNapoli levels in almost every chart I make and even though these levels are almost always changing over time, it seems more times than not, price action does at least flirt near these dinapoli levels if they don’t break through it all together. Furthermore, by using them alongside with Fibonacci Targets and/or the automatic Fib level indicator in MT4, at certain points like the chart below, we see multiple indicators in the same location, making a strong case for the price to reach or bounce off of that level, aka due to probability, a better place to put a stop. Just things I’ve noticed.

The following is an excerpt from an article by Kent Shaw about how to calculate DiNapoli levels, even though the Expert Adviser does this for me, I thought it important to note exactly how it works. (to visit this entire explanation with image examples visit here: http://www.theoptionclub.com/dinapoli_levels_explanation_and_example.html)

DiNapoli also uses what he calls Logical Profit Objectives (LPOs) to calculated potential support and resistance levels. ¹

The calculations for the three LPOs:

1. the objective point (OP),
2. contracted objective point (COP),
3. and expanded objective point (XOP).

Any LPO or Fib level that has been penetrated by price should be eliminated from the analysis. ²

Once the DiNapoli levels (i.e. all Fib levels and LPOs) are calculated. Look for “confluence” (K) or areas of agreement. ³

This occurs where a 38.2% from one swing point is close to a 61.8% level from a different swing point or where either type of Fib level is close to an LPO. ⁴

I found an article written by Joe Dinapoli back in 2004 where he tries to explain his system on a down to earth level for OTC traders like myself. The main thing I got from what he has to say is how exactly he uses his special way of calculating Fibonacci levels and applies to his trading methods in stocks and Forex.

Some important points that I’d like to remember are:

• The lagging and coincident indicators I use to establish market trend or direction are displaced moving averages, a combination of the MACD and Stochastic, as well as a series of 9 price patterns.
• The only leading indicators I use are
  • a price-predicting oscillator as well as
  • a specialized, advanced form of Fibonacci analysis.
• The more accurate your lagging indicators are the better your results.
• The more accurate your leading indicators are the better your results.
• It takes some experience to learn just how to employ the techniques.
• You come to a clear point of resistance, you clear your trade, and the market keeps going.
  • This problem can be mitigated if you trade multiple contracts.
  • I’ve found that exiting all positions at predetermined logical profit objectives is always better for my bottom line.

If i learn more about DiNapoli levels without giving away any secrets to his program I’ll be sure to add them to the post. Just know, he is an experienced trader who travels all over the world teaching his methods, and even though I talk alot about worrying about guys who spend more time promoting things about Forex rather than trading Forex, I do believe Joe DiNapoli to be the real deal. But this is not an endorsement of his programs, I just have limited experience with how they are calculated and the DinapoliTargets indicator in MetaTrader4. I plan to buy some of his programs as soon as I have time to sit down and read them, maybe this weekend.

1. http://www.theoptionclub.com/dinapoli_levels_explanation_and_example.html [↩]
2. http://www.theoptionclub.com/dinapoli_levels_explanation_and_example.html [↩]
3. http://www.theoptionclub.com/dinapoli_levels_explanation_and_example.html [↩]
4. http://www.theoptionclub.com/dinapoli_levels_explanation_and_example.html [↩]