It was mentioned in a past article that Fibonacci forex trading is the basis of many forex trading systems used around the world by profitable forex traders. These systems are all based on the famous Fibonacci ratios (.236, .50, .382, .618, etc.) and each of them can specialize in a particular ratio along with other minor indicators in order to make the pinpointing of the entry and exit levels as accurate and profitable as possible.

One of the widely used Fibonacci ratios is the 0.382 ratio. As it can be easily seen on any forex chart, currency prices are continually changing and they follow an oscillatory pattern with peaks and valleys. The limit of the peak is usually called a resistance level while the valley is usually called a support.

In order to find the 0.382 ratio level what you do is, first; measure the size of the drop or rise over your time of interest. Once you have that value you multiply this by 0.382. Now depending on what you are looking at, a rise or a drop on the price of the particular "currency pair" you are trading, you will add the last value you calculated to the total drop or subtract the value from the total rise.

These operations will give you the 0.382 Fibonacci ratio level, either for a rise or a drop on the chart you are analyzing. Once you have the value you can then start planning the strategy you will follow in order to make a high probability profit from this valuable information. For the 0.382 ratio level calculated for a recent rise in the "currency pair" exchange price, your calculated level will be a highly probable support and for the case of a level calculated for a recent drop of the prices your level will be a highly probable resistance.

Knowing this ahead of the market and having the proper secondary indicators, will give you a huge advantage over most forex traders, and that's something any trader would like they could count on. That's why Fibonacci trading is so widely accepted over the world, and of course, why it's so profitable and successful.

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The Fibonacci indicator has been talked about a lot in the realm of Forex trading. While some experts dismiss it as just another exaggerated term, others think that there is credence to this theory. Using the Fibonacci indicator, you can maximize your understanding of currency trends as well as your profit margins in trading. By using the Fibonacci method or Forex trading strategy you can estimate expected price targets. This is applicable even after experiencing a major price swing. The concept of Fibonacci should be applied only in certain instances. Therefore, before this concept is applied, one should understand that at times, support levels, which are broken, can get resistant in later rallies. This happens especially when support levels of broken kind coincide with retracement levels of the Fibonacci trend. One of the central driving factors behind the Fibonacci Forex trading strategy is that when the market swings towards the same path, the trend relates to one another after the breakout phase. The two different swings relate to one another only from breakout point and not from where the second swing happened in a similar direction. Thus, breakout points can be a crucial element in retracing using the Fibonacci method. By making the assumption that one breakout point is a retracement level for a particular Fibonacci, you can safely assume that this trend will keep continuing until it reaches resistance levels and initiates a countertrend. Do These Terms Sound Like Latin To You? If so, it could be because you do not have the right knowledge about the Forex trading market. Strategies like the Fibonacci one are explained in detail in Forex training programs. Such Forex training courses not only explain the definition of these strategies but also use charts to explain how to apply such strategies to make a winning profit. Many experts have used such strategies to establish price targets set in the future. This is like pre-emptive reasoning, to make more money without letting existing capital be destroyed! Several Forex trading experts have used indicators to estimate currency trends and thus made huge profits in the process. There are many indicators to choose from. Yet the Fibonacci remains one of the most respected and tested ones today. While indicators help you establish currency price patterns and trends and thus understand where your money should be, they should not be the only guiding factor for you. In addition to such indicators, you also need access to good quality Forex training courses. Such courses teach you the intricacies of each strategy, which situation it is applicable to and when to use it to make a profit. Along with this, money management practices are also critical. These tactics help you protect your capital by spreading it across several Forex trading systems. This way, even if there is a loss, it does not affect all of your money since it is spread across different systems. These are tricks, which can be learnt from a good quality Forex training program.

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I'm sure you have heard of the great mathematician Leonardo of Pisa, also known as Leonardo Fibonacci? He was a highly influential Italian who lived almost 800 years ago, so you're probably wondering what Fibonacci has to do with forex trading, I'll get to that shortly. He is most famous for developing the numerical sequence that is widely known as the Fibonacci Numbers or the Fibonacci Sequence (he is also credited with introducing the decimal system in Europe). The very first number of the sequence is 0 and the second is 1. The sequence develops as each subsequent number is the sum total of the previous two numbers. In mathematics it's known as a recurrence relation. Below are the first numbers in the sequence: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, 4181, and so on. e.g. 2 + 3 = 5, 3 + 5 = 8, 5 + 8 = 13 etc. Leonardo Fibonacci discover that the Fibonacci sequence and their ratios could be found everywhere throughout the natural world, existing in the most unlikely places, almost as universal rule. So how does Fibonacci and forex trading go hand in hand? The Fibonacci numbers are important for charting, spotting patterns and indicators in the forex markets, and are used as an important method of analysis Why? When you analyse the currency markets carefully, you often find the same ratios as those in the Fibonacci number sequence. You'll also find them in investments such as stocks. The main three numbers you need to be aware of, and ideally should commit to memory are 0.618, 0.500 and 0.382. There are other numbers, but for starters these are the big 3 and most important. So what are they used for? The Fibonacci numbers are used by forex traders to calculate what are known are retracement levels, which are used to determine when to place buy orders or sell orders. It works like this: If a currency pair is trending upward lets assume, then history will tell us then at some point it's going to hit a peak and go into at least a temporary decline or reversal, and then resume the upward trend. When it starts the reversal, that's where the Fibonacci numbers come into play. The prices of the currency pair that are following the upward trend is usually predicted to reverse/decline backwards to one of the key Fibonacci numbers, and then bounce back again to follow the upward trend. The key is to forecast this point accurately so that you can buy in before the trend continues upward, so that you capitalise on the reversal and then profit. You should have a charting mechanism built into your online trading platform which will chart the Fibonacci numbers. Your retracement levels should be automatically mapped on your chart when you simply draw a line up from the low point to the high point. Obviously there are other things to take into account, it's not as simple as just buying into a trade when the price hits a Fibonacci number. For a start you never know which retracement level the price will drop to and stop at. If you opted for 0.382 and the price ended up dropping to 0.618, you've just lost a whole load of pips. Conversely, if you buy in at the wrong high or low points, the retracement levels are going to be completely out of sync. It can be problematic. They sometimes don't work at all. The forex market is such a dynamic complex system with so many variables at play it would be foolish to rely solely on one method to predict price changes. Moral of the story? Find a trading system or strategy that incorporates as many elements and variables as possible, do lots of research, data mining and plenty of good old hard work.

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