Fibonacci Retracements: How to Trade Fibs in Forex

This popular tool has its roots in the thirteenth century when the mathematician, Leonardo Fibonacci, identified many of the key numbers in his observations. Ralph Nelson Elliott and W. Gann used these ratios in their various analyses as evidence that market forces behave similarly to physical forces in Nature.

These common ratios can be found in a strand of DNA and in the formation of galaxies in the Universe. Traders use these ratios to predict with uncanny accuracy future levels of support and resistance in the forex markets.

Metatrader offers many options from lines, to fans and channels, but the most popular use is to determine what are called lines of retracement, those levels where a wave ebbs and flows to form support and resistance.

After designating the beginning and ending points of a previous trend, the tool creates a series of lines where future expectations are highest, and traders then plan their trading strategies accordingly.

The Fibonacci application is common on Metatrader4 trading software, and the calculation formula sequence involves these straightforward steps:.

Fibonacci Forex Trading Explained - anajevopule.web.fc2.com

Software programs perform the necessary computational work and produce a Fibonacci overlay as displayed on the pricing portion of the following chart:. The common ratios are presented, which are Targets can also be assigned above Awareness of these expectations can make you a more effective trader.

Traders use Fibonacci Ratios to plan out step-wise trading strategies that can be enhanced with pattern recognition and the use of a momentum oscillator. The next article in this series on the Fibonacci application will discuss how this tool is used in forex trading and how to read the various graphical signals that are generated.

Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit.

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Please upgrade your browser to improve your experience. World's best forex deals and strategy. Fibonacci Ratios Formula The Fibonacci application is common on Metatrader4 trading software, and the calculation formula sequence involves these straightforward steps: Sign Up Free Demo.