The Italian mathematician Leonardo Pisano Bogollo first introduced the Fibonacci sequence to the West in the 13th century. These strings of numbers contain unique mathematical properties and ratios, and they can all be found in nature, architecture, and biology to this day. The widespread existence of these ratios in the universe also extends to financial markets. This is one of the reasons why many traders use Fibonacci trading strategies to determine market turning points, and why you should also consider it.
Fibonacci Forex Trading
In this article, you will learn the unique properties of the Fibonacci sequence in foreign exchange trading and how to use Fibonacci levels in different markets through Fibonacci trading strategies. You will also learn the specific techniques of trading Fibonacci by using Fibonacci retracement levels and Fibonacci extension levels, and how to start using free advanced Fibonacci trading software. let’s start!
What is Fibonacci trading?
Before we study the mechanics of Fibonacci trading and how to convert it into a foreign exchange Fibonacci trading strategy, it is important to understand the Fibonacci sequence and the unique mathematical characteristics it first provides.
Understand the Fibonacci sequence in foreign exchange trading
The Fibonacci sequence is a sequence of numbers in which each number after 0 and 1 is the sum of the first two numbers. This will continue to infinity.
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, 4181, 6765…
There are some interesting relationships between these numbers that form the basis of Fibonacci digital trading. Although we cannot cover all of these relationships in this article, the following are the most important relationships we need to understand when reviewing Forex Fibonacci trading strategies later:
If you divide the number by the previous number, its approximate value is 1.618. This will be used as a key level in the Fibonacci extension, which you will learn later in this article.
If you divide the number by the next highest number, its approximate value is 0.618. This number forms the basis of the 61.8% Fibonacci retracement level.
If you divide the number by the higher of the other two digits, the approximate value is 0.382. This number forms the basis of the 38.2% Fibonacci retracement level.
1.618 is called the golden ratio, the golden average or φ. The opposite is 0.618, these two numbers can be found throughout nature, biology and the universe. In fact, according to William Hoffner in Smithsonian Magazine in December 1975: The ratio of 0.618034:1 is the mathematics of playing cards and Parthenon, sunflowers and snail shells, Greek vases, and spiral galaxies in outer space. basis. Most of the Greek art and architecture are based on this ratio. "
So, how are the golden ratio and other Fibonacci levels used in Fibonacci trading? First, divide these “special” numbers into Fibonacci retracement levels and Fibonacci extension levels, and then provide the value of possible inflection points in the market.