Fibonacci Levels

Fibonacci Levels
The analysis of Fibonacci levels is a big issue, and there are many studies on aspects of Fibonacci quite complex, but for Forex trading we will have only two of them: Fibonacci retrocessions and Fibonacci Extensions.

Let us first introduce you to who gave name to this whole matter of Fibonacci levels: Leonard Fibonacci

The proportions are born from the following series of numbers: 1,1,2,3,5,8,13,21,34,55,89,144 ...

 

[caption id="attachment_549" align="aligncenter" width="640"] Fibonacci Levels[/caption]

 

This series of numbers is derived from starting from 1 followed by 2, then adding 1 + 2 to get 3, then adding 2 + 3 to get 5, and so on.

After the first numbers in the sequence, if you calculate the percentage of any number with respect to the next one, the result is .618. For example 34 divided by 55 is 0.618.

If you calculate the percentage between alternating numbers, the result is .382. For example, if you divide 34 by 89, the result is 0.382.

These percentages are known as "gold results". And to not make this longer, these are the percentages that you should know:

Fibonacci recoil levels:

0.236, 0.382, .500, 0.618, 0.764

Fibonacci Extension Levels:

0, 0.382, 0.618, 1,000, 1.382, 1.618

It really is not necessary to calculate all this. The trading platform of your Forex broker will usually do all the work. But it is always good to be familiar with the basic theory behind the indicators.

Forex traders use Fibonacci retracement levels as levels of support and resistance. Since many operators observe the same levels and place buy and / or sell orders in them, the supports and resistances usually meet the expectations of these levels.

Forex traders use Fibonacci extension levels as profit levels. Again, this tool serves and meets expectations as many traders observe the same levels to place buy and sell orders for profit.

Many graphics software includes Fibonacci levels extension and rewind tools. To apply fibonacci levels to your graphs, you need to identify high and low oscillation points.

A high oscillation point is a Japanese sail with at least two lower points to the right and left of itself.

A low oscillation point is a candle with at least two higher points to its right and left.

We will see practical examples of the use of these levels in the next two articles of this Forex course.

 

 

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.