What is Fibonacci Forex Trading, and How Can I Use It?

by Andrew McGuinness     Mar 14, 2018

If you're new to the world of Forex trading, you could easily be overwhelmed by the number of trading styles and strategies that can be used to profit on the Forex market. And the truth is that there are a number of Forex trading strategies that can be profitable; the difference comes in finding a strategy that works for you and that you can understand, as well as one that is profitable. The Fibonacci Forex trading strategy is one that has been touted by experts in currency exchange for years, and can be useful for even beginner traders who are looking to enter the market with a big impact. Fibonacci Forex trading is currently being used by traders both on the thousand and billion dollar levels, and an education in Fibonacci Forex trading can be a great backbone for traders all around the globe at any price point. But what is the Fibonacci method, and how can you incorporate it into your trading strategy?

Fibonacci was an Italian mathematician who is best known for the development of the "Fibonacci sequence," which describes a rippling effect that is seen when a series of numbers forms the sum of the two beneath it. You've probably studied the Fibonacci sequence when you were in high school mathematics; a sample sequence would go something like 1, 1, 2, 3, 5, 8, 13, 21, 34, etc. The Fibonacci sequence has been used to develop a number of mathematical theories, and the pattern has even been observed taking place in both natural and manmade structures and developments thanks to its oscillating effect. However, for Forex trading investors, it's more important to think about Fibonacci sequences in terms of the dividends and margins that they see when deciding how a currency or currency pair will fluctuate in value. The reason that the Fibonacci sequence is so extraordinarily useful is because the pattern of fluctuation has been observed in the areas on physics, natural artwork, as well as economics; it's a common way to predict how currency will move, and you can use the sequence to make informed decisions on when to sell and buy your currencies of choice. Fibonacci ratios, derived from sequences (for example, 236, .50, .382, .618, etc. to use the above instance) have the advantage of being able to be calculated ahead of time. This gives traders an inherent advantage, because when they go into the next trading day, they will already have an idea of when the best times to buy and sell will be if their currency values begin to fall into the oscillating pattern of the Fibonacci sequence.

When it comes to Forex trading, education is the foundation on which every successful account is built up. Whether you're interested in learning more about the Fibonacci method, or you're interested in following a method that relies less on mathematics and more on political or economic factors, learning as much as you can about how to predict the movement of currencies will help you become the most profitable trader that you can be.

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