Fibonacci forex trading is based around the Fibonacci sequence, a mathematical phenomenon discovered in the 13th century by Italian mathematician Leonardo Fibonacci. He found that when you start from 0 and 1 and create a sequence by adding the last two numbers together each time, that is, 0 1 1 2 3 5 8 13 21 34 and so on, the series has a number of interesting properties.

In particular, the ratios between the numbers are the same ratios that are often found in the natural world as well as in other mathematical situations including stock and currency trading charts. Why should it be that the ratio between the length and width of each leaf of on a tree can be the same as the ratio between a price movement and its retracement? Nobody knows, but the why does not matter for practical purposes. We can still build Fibonacci forex trading systems around this phenomenon.
During a currency trading trend, there are always retracements when the price movement reverses for a time before continuing in the overall trend. It can seem like a ‘two steps forward, one step back’ kind of thing. In fact, the ratio between the movement and its retracement often reflects the ratios in the Fibonacci sequence.
The most important numbers here are 0.236, 0.382, 0.5 and 0.618. These can be used to predict the strength of the retracement which is often reflected in support and resistance lines. If you find this hard to believe, try it out with your own charts. You will be amazed how often one of these numbers comes into the picture.

Fibonacci ratios can also be used to produce extension lines which can predict how far a trend will go before a true reversal. This can enable a trader to take the maximum profit from a trend. So Fibonacci forex systems can be based around following the trend, as well as retracements.
The math can be complicated but in most cases you do not need to understand the math in order to follow a Fibonacci forex trading strategy. The systems are usually not complicated. In fact, they can be very simple. Based on straightforward currency trading principles such as support and resistance, these systems can even seem too simple. But do not be fooled! Fibonacci forex systems can be an extremely powerful tool in the resources of any currency trader.

Expert Advisor Reviews

Tags: Fibonacci forex, Forex Trading

This entry was posted on at and is filed under Fibonacci. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.