What is Fibonacci Forex Trading

Fibonacci forex trading is a powerful tool and the basis of many forex trading systems used by a great number of market makers and professional bank traders around the world.

Billions of dollars are profitably traded by the big institutions every year based on Fibonacci trading techniques.

The name Fibonacci comes from the Italian mathematician Leonard Fibonacci. He discovered that this sequence is repeated through out the universe. Proving it with his famous Fibonacci sequence, the definition of this sequence is that it's formed by a series of numbers where each number is the sum of the two preceding numbers; 1, 1, 2, 3, 5, 8, 13…and so on.

Well in the case of Fibonacci forex trading what is more important for the forex trader is the Fibonacci ratios derived from this sequence of numbers, i.e. .382, .50, .618, 1.27 etc. These ratios are mathematical proportions prevalent in nature and man made structures.

A good Forex trading system can greatly benefit from this mathematical proportion due to the fact that the oscillations observed in forex charts, where prices are visibly changing in an oscillatory pattern, follow Fibonacci trading ratios very closely as indicators of resistance and support levels.

Although Fibonacci price points, or levels, for any forex currency pair can be calculated in advance so that the trader will know when to enter or exit the market. I have experienced that the calculations do not work to the exact cent, but they do come close.

For best results the calculations need to be done constantly on different time frames, because the price movement is also consistently on the move.

Although these calculations seem overly complicated scaring away many new forex traders that are just beginning to understand how the forex market works and how to make a profit in it, they don’t need to be, thanks to new software available today by many charting services.

Fibonacci forex trading is a simple and powerful concept, that when a trader becomes familiar and can grasp the basics of using Fibonacci levels, the accuracy of successful trades will increase due to the entry and exit point provided for every trade.

 

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