Skip to main content

Fibonacci levels in Forex

By

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.


Labels:

Comments

Post a Comment

Popular posts from this blog

Pin Bar Trading Strategy - Price Action Setups

By
Pin Bars - Price Action setups The tops of the bars on each side "nose" are the "eyes". Please note that Open and Close PB, ie nose should be in the redistribution of the left eye. Pin-bar can be traded as a single figure, and in combination with others. These include Fibonacci levels, important pivot levels (reversals), moving averages, peaks and main swing, fusion (the MA or Fib levels), rollbacks of current movements (not less than 23% Fib). For greatest reliability worth trade PB occurring at the maximum or minimum swing, or repelled from the merger. Figure 2 PinBar - a very reliable pattern Price Action. Trading on the pin-bars For beginners we recommend to put a stop order (or limit) directly under the base of the PB, about 10 points lower. Foot and input orders should be placed in 10 locations from the extrema, as the price may be a bit to go beyond the maximum or minimum. Figure 3 If current orders we receive profits, trail the
Post a Comment
Read more

Leverage Forex, what is better to choose?

By
Leverage Forex, what is better to choose? So, what is meant by the definition of “ leverage Forex ”? It is the ratio of the volume with which the trader works to the total amount of funds held in the account. This ratio is designated as 1:100 (pronounced - one in one hundred). That is, having the Deposit, say, $ 100, you can trade in the amount of $ 10,000.  Values leverage Forex can be different. A good Forex broker provides leverage Forex from 1:20 to 1:500. The last option is very risky, although good traders salpingotomy and/or other aggressive trade. Optimal consider the ratio of 1:100, with the option risks:yield as balanced as possible. Special attention to the choice leverage Forex should be given to new traders. Because the maximum degree of risk in each transaction is considered to be 1-3% of the Deposit. The higher this will leverage Forex, the higher the risk of loss of Deposit. Accordingly, reducing the leverage of Forex (and, hence, the volume of trading p
Post a Comment
Read more

Model absorption - price action setups

By
Model absorption - Price Action setups Because of the contrast, MP for the trader relatively high probability of a good, profitable entry into the market. Required components of the bright signal - 2 candles that follow one after the other (or bullish and bearish or vice versa). In this case, the second candle surpasses the first value of his body, as if absorbing it. Fig.1 Bullish and bearish absorption For MP important are the following conditions: 1. Presence of a pronounced upward or downward trends can be short. 2. The body of the second candle should be more (absorb) the body first. Shadows can not be absorbed, then the signal is considered to be weaker. 3. The body of the second candle should be a contrast in color to the body first. Exception: a small body of the first candle ( Dodge or close to it). Figure 1 you can see both versions of the MP. Cover only the size of the body of the second candle, not its shadows. Bear MF often represented by a small candle of any color (
Post a Comment
Read more