Fibonacci levels in Forex

Let us presume that the Fibonacci levels (UV) today is if not every second, every third or fifth successful trader. Themselves UV are not a trend indicator, but allow you to more clearly see the big picture from what level the price will jump back to what level will go etc.

First, let's find out the origin of this tool.

Fibonacci levels - the origins

In the XIII century, the famous Italian mathematician Leonardo Fibonacci was discovered a simple sequence of numbers: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144. Each number in the sequence is the sum of two previous ones (except for 1 and 1, of course). For example, 2 is 1+1, 13 = 5+8 etc.

Mathematician discovered that when dividing two adjacent numbers (smaller to larger) the result is always the same (rounded). For example, 21/34 = 0,618, 55/89 = 0,618 etc.

The last pattern - if we divide any of the numbers on the number following after him +1, we obtain the relation, close to 0,382. For example, 34/89 = 0,382, 55/144 = 0,382 etc. If this will be the number of +2, the ratio may be about 0,236.

Using these patterns were created UV, which allow us to analyze and make a forecast of any financial instrument.

Fibonacci levels - practice

Watching the dynamics of price fluctuations over longer periods of time, the trader makes sure that no trend (trend) cannot last forever - at some point, the price makes correction (rollback). It is UV identify possible remedial goals, not to mention the strong levels of support and resistance.

Have a pronounced upward trend. Euro meets strong resistance at the level of 1,6230, followed by a downward correction (segment 1-2).

The first order correction according to the UV level is 1,6110 (61,8%). This is confirmed by the graph. Breaching this level downwards it would be logical to assume the continuation of the correction to the level of 50%. But the Euro strayed and went to test the 100%Fibonacci level. See false 2 breaking with the return channel.

The key levels are traditionally considered to 38.2%, 50%, 61.8% of UV. These levels have the greatest support or resistance when the price changes.

If the trend continues upwards, possible targets will be the levels 161,8%, 261,8% and to 423.6%, which are higher than 100%.

If we impose the Fibonacci levels (in MT4 tool is called Fibonacci Lines) on the daily chart (see figure 2), we see the movement (upward trend) from 0 to 100%. Then it should roll down to the level of 50%, then again up to 161.8%, a small correction of the down and up again to 261,8%.

It makes sense to use charts of different time frames.

Total. UV permit with high probability to identify possible targets of correction, to continue the trend, as well as strong levels of support and resistance.