Recently forex trading (along with Fibonacci trading) has become an extended activity for many people around the world; people is learning about the great advantages forex trading can give to traders and as they start placing their first trades it is inevitable that at the same time they understand the need for reliable price forecasting techniques that allow them to become profitable traders. The search for this forecasting tool or technique has turned into one of the most persisting thoughts in the minds of both, new and experienced forex traders.
There are some, but one of the best techniques you can find and use is called “Fibonacci Trading” . This forex trading technique is the basis of many forex trading systems used by a great number of professional forex brokers around the globe, and many billions of dollars are profitable traded every year based on this trading technique.
Fibonacci trading is directly related to a curious phenomenon related to the existence of specific mathematical proportions that are prevalent in many places and structures in nature, as well as in many human made creations.
Fibonacci was the last name of an Italian mathematician and he is best remembered by his world 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 ...But in the case of currency trading what is more important for the forex trader is the Fibonacci ratios derived from this sequence of numbers, i.e. .236, .50, .382, .618, etc.
It is very probable that you have already observed a forex chart and the oscillating pattern prevailing no matter what time frame you are observing. Thanks to these observed patterns in the currency price charts, people began to make questions and came to the conclusion that maybe Fibonacci ratios could be applied to trading as a reliable indicator of future price movements.
And it was indeed a great discovery to find out that Fibonacci ratios described with great accuracy the currency markets price oscillations. This means that in fact, Forex traders can greatly benefit from this mathematical proportions due to the fact that the oscillations observed in forex charts, where prices are visibly changing in an oscillatory pattern, follow Fibonacci ratios very closely as indicators of resistance and support levels; maybe not to the last cent, but so close as to be really amazing.
In Fibonacci trading we can define what is known as Fibonacci price points, or levels, for any forex currency pair you may be trading at the moment and they can be calculated in advance and used as a forecast tool, so that the you as a forex trader will know when to enter or exit the market if the prediction given by the Fibonacci ratios technique you are using as a day trading system fulfills its predictions of resistance or support levels.
