Fibonaccial Trading Techniques For Forex
Fibonacci was a great mathematician from Italy. He founded the new sequence of numbers and it was named after him called Fibonacci. The 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377,610, etc are the numbers of this sequence which has the starting of 0 and 1. Each number in this sequence is the sum of the preceding two numbers.
On going to the higher sequence of the Fibonacci numbers, the closer two consecutive numbers which when divided get the answer of the golden ratio. On applying these ratios to the trading stocks, thus results are produced as primary and secondary. One direction result indicates the primary result and the opposite direction refers to the secondary result.
In the primary trend, the most common Fibonacci retracement levels are 38.2%,50%, and 61.8%. These standard levels are used by most basic stock charting applications. These Fibonacci retracement levels act almost as magnets once the countertrend rally occurs. Apart from the above three, there are a few other levels that can provide resistance. These are 75%, 78.6%, 87.5%, and 88.7% retracement levels.
The thumb rule mentions that the retracement levels show about 50%, and the previously mentioned levels attract the price by behaving like magnets. The price must be said by the persons who are familiar with those levels. Always the prices do not remain in a steady state. Stocks, futures, Forex, and all liquid instruments, will often oscillate in Fibonacci proportions.
The price scale and time scale charts work with the applications of Fibonacci numbers. Fibonacci ratios with a few simple indicators can be used to determine probable price turning points, and optimum entry, exit, and stop-loss levels. So, the trader should have a keen watch on his trading.
Then use price reversal pattern recognition after identifying the primary trend, to coincide with the Fibonacci retracement level to acknowledge that the counter-trend move has been over. Then to know the actual lows and double bottom or breakthrough that level look for stocks.
The trader must have a clear idea and knowledge of the international markets because of the “risk arbitrage” in the existing market situations mainly in “Forex trading”. For help “Forex signal trading” can be used by the trader. While performing “Forex trading” the transaction of currency between nations take place, so the trader must be aware of that.
This application of Fibonacci to trading can be very complex for a new beginner and it does take time and experience to perfect it. Many floor traders use these Fibonacci retracement levels. These levels are used by many advanced traders as well, it allows them to become a self-fulfilling prophecy.
