<Last updated 25.04.2020>
Hi! If you are interested in Forex please read carefully the below article that shows how you can make use Fibonacci Numbers and Their Value as a Technical Tool.
Who is Fibonacci?
He discovered a simple series of numbers that created ratios describing the natural proportions of things in the universe.
The ratios arise from the following number series: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144…
Fibonacci retracement levels work on the theory that after a big price move in one direction, the price will retrace or return part way back to a previous price level before resuming in the original direction.
Traders use the Fibonacci retracement levels as potential support and resistance areas the support and resistance levels tend to become a self-fulfilling prophecy.
How to apply Fibonacci levels?
In order to apply Fibonacci levels to your charts, you’ll need to identify Swing High and Swing Low points.
A Swing High is a candlestick with at least two lower highs on both the left and right of itself.
A Swing Low is a candlestick with at least two higher lows on both the left and right of itself.
The theory is that after price begins a new trend direction, the price will retrace or return part way back to a previous price level before resuming in the direction of its trend.
You need to hone your skills and combine the Fibonacci retracement tool with other tools to help give you a higher probability of success.
Combining Fibonacci with other techniques.
One of the best ways to use the Fibonacci retracement tool is to spot potential support and resistance levels and see if they line up with Fibonacci retracement levels. There’s no guarantee that price will bounce from those levels. However, at least you can be more confident about your trading activity.
A good tool to combine with the Fibonacci retracement tool is trend line analysis. The combination of both a diagonal and a horizontal support or resistance level could mean that other traders are eyeing those levels as well.
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