Fibonacci Forex Trading indicator is a popular way to analysis the fx market, Fibonacci is a number sequence in math in which the addition of the last two numbers forms a number that if combined with the last value makes another Fibonacci value, for example, see this series (1, 1, 2, 3, 5, 8, 13, and 21). As in this series, you can see that the 3 is the sum of 2 and 1, 5 is the sum of 3 and 2 and so on. This is an example of Fibonacci sequence. There are many stories known about the origination of Fibonacci sequence. The first is about monk of 12th century named Leonardo de Pisa who was also called Fibonacci by his friends, discovered a math sequence that can be seen throughout nature. Fxstay team recommend Fibonacci trading tools in your forex trading.
According to this sequence, the addition of the last two numbers forms a number that if combined with the last value makes another Fibonacci value. The numbers in the Fibonacci sequence have a relationship. According to this relationship, any number in Fibonacci sequence is approx 1.618 times greater than the preceding number and 0.618 times than its previous number. Some people also say that this sequence originated in the western world and was concerned with rabbits. What will be the number of pairs of rabbits will be there at the end of first year when counting started from one pair assuming that all rabbits would produce offspring continuously? The answer of this question introduced the famous Fibonacci sequence. Forex traders are also too much interested about calculating and knowing Fibonacci sequence but the difference if only that money play the role of rabbits.
You should have no doubts about how you can apply the Fibonacci sequence on a Forex chart because only correct application of Fibonacci tool can generate profit. Now see how to apply Fibonacci sequence in Forex Trading in the following easy steps.
Find out the movement of the trend lines
Observe the chart carefully in the time period of 1 minute, 5 minutes and 60 minutes and notice if trend lines are going upwards or downwards. Either there will be an uptrend or downtrend so find out.
Find out the minimum and maximum price points
Find out the minimum and maximum points from the chart because minimum and maximum points will give you retracement levels of 0% and 100%. 38.2%, 50% and 61.8% are the most important retracement levels in Fibonacci sequence. These retracement levels are used as the support and resistance points.
Use the Fibonacci Forex Trading tool of your trading platform
Use the Fibonacci Forex Trading tool of your trading platform to see the Fibonacci retracement levels. This is an automatic process that will generate different lines on your chart if you drag your cursor to the highest price after clicking on the lowest price. These lines generated on the chart are the Fibonacci retracement levels.
Decide the Fibonacci retracement level that you will use to open or close an existing position
This is an important step where you decide that at which price of Fibonacci retracement level should you open a new position or close an existing position.
Don’t trade without plan
Do Forex Trading confidently. Small profit in the beginning should not make you greedy and some losses in the beginning should also not fear you so to save yourself from such situations, you should plan your trading activity and execute your plans. Make your own rules and follow. Don’t attempt for more than 20 pips to close your position.