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Fibonacci in Forex
The Fibonacci sequence is one of the most famous in mathematics and it has many wide-ranging implications, from the natural world to the world of Forex trading. For traders, the value of this sequence – and in particular what’s known as the Golden Ratio – is that it can be used to plot points where action happens in the market.
In very simple terms, you can use the Fibonacci sequence to work out what are known as Retracement Levels. And when you superimpose those retracements against a currency chart, you’ll often observe that many of the major price movements occur on, or near, the lines. To some degree, this gives a trader some ability to predict when things will change, meaning you get a better idea of when to buy or sell.
These days, using Fibonacci is simple. Because your trading platform will have in-built tools that can apply Fibonacci to your charts, there’s no need for manual calculations. But because most traders consider Fibonacci just one of many useful analysis tools, it’s important to get to grips with what it does, how to use it and how not to use it.