Technical Analysis (5) Fibonacci



The Italian mathematician Leonard Fibonacci discovered a set of numbers that might seem They are simple, but they have contributed to creating rates that are present in nature. Fibonacci numbers include many things From sea oysters to tree branches, or even to the formation of the solar system, all these things are what formed The Fibonacci vision, also used by analysts in charts today. Trading analytics based on The Fibonacci system is really broad, but because this is an introduction to forex trading, we will limit ourselves to the means The most common.

Let's start the explanation by taking a look at the Fibonacci number series:

1, 2, 1, 3, 5, 8, 13, 34, 21, 55, 89, 144...

You will notice that each number is derived from the two numbers preceding it. Example: (1+1=2), (2+1=3), (3+2=5), (and even (89 + 55 = 144),) and so on to infinity.

When you get those numbers, you can then calculate things that can be inferred, and open its rate, which is now famous,

For example: .382 and .618, by dividing one number by the number preceding it (144/89 = 618.0), or (89/55 = 618.0.)

You can also calculate the ratio between two alternative numbers, and what will come out of this process is the number 382.0. 

Example: 8 we divide it by 21 = 3809.0, which is a number close to 382.0, which is the number you are rounding to All results while trying to reach a larger number.

These ratios are also known as the “golden ratio” 

You are required to know how to calculate all these numbers, you can use trading software to complete the process. use to guide them while making decisions, so those levels become a self-fulfilling prophecy. 

In general, to apply Fibonacci levels to any chart, a trader needs to know two points, namely: Swinging High (Swing High) and Low Swinging (Swing Low), these two swings are determined by any price movement. Getting Started Look at the obvious tops in the graph as well as the bottoms to get what you need. When you get that, consider it The range goes from high to low as a value equal to (1 or 100%). Now if you look at the Fibonacci retracement levels, You will see that it is 382.0) or 2.38% (or 618.0) or 8.61 (from your calculation of the range from top to bottom. What we are saying is that once there is a top, prices can go down to the Fibonacci level (say 2.38%, and go down, or And here you get an opportunity to buy (entering the long position). Conversely, if the market is trending Already down, and I was able to spot an important bottom, then you can wait and see if the price goes up (say 2.38%, Or 8.61 percent (and in this case you are allowed to sell (a short position entry). Simple!

Explaining the Fibonacci correction

Notice below that the highs and lows are specific, and the Fibonacci ratios are shown on the chart. you can here To note that the rise in the EUR/USD was entered at the price of 35160.1, and the decrease at the price of Those highs and lows were entered with the numbers 2.38 and 8.61 as shown (between the numbers 31650.1, and By examining what happened after the market peaked, you can see it regressed to below 236.0, and broke through Level 382.0 (without closing below), and then quickly rose. It gave the trader a huge opportunity to buy.

Now let's see how we can use the Fibonacci retracement levels in the bearish scenario. The graph shows

Below is the EUR/USD market, based on hourly changes. Swing up on 04/13/09, stop at

3391.1, while the swing down on 09/13/04 stopped at 3146.1. Fibonacci retracement levels at:



32396.1 (382.0)

Below you can see that the market is trying to rise from the decline at 31460.1, but failed to maintain the Any strength to exceed (50) 500.0%, the price level, 32685.1. When the price reaches this level, quickly Its direction is reversed, and it enters a downtrend again. If you enter a short position at the level of 500.0 you can accumulate a profit After the trend turned to the downside.

We show you another example: The chart below is based on the movements in the EUR/USD market every 30 minutes. The high swing is on 10/09/03, at 28210.1. The low swing is later in the day i.e.
10/09/03, standing at 26106.1. Correction levels are:


By referring to the chart below, you will see that the market broke through the 50% correction level, several times, and approached 8.61%. Before falling again, giving the trader several opportunities to sell and profit. Once again, do you sell also this time?”

If you did, you would have inflicted some losses on yourself, but let's check what happened and see what you can learn.

We see some losses here, but trading is not about being right, which is not understood by many people in the world. The beginning. Trading is about using tools to make and keep the money. And in this scenario, even if I'm wrong You can place a stop loss order at the next Fibonacci number, which is 618.0 (or the price of 27406.1), thus limiting the loss, and it could continue to the level of 28575.1 and beyond.

From those examples, you can also see the chart for yourself, that the market finds a temporary foothold at levels of Fibonacci correction. Remember to use these tools to your advantage when placing your entry and exit orders.

Fibonacci extensions

Fibonacci rates are used to determine levels of You can also use Fibonacci rates to determine potential profit points. potential support or resistance. However, traders use these rates to determine where the price will go. These rates can also be applied to finding Fibonacci targets or extensions, and the method for determining those levels is similar. In determining the levels of Fibonacci correction.

Drawing Fibonacci Extension Targets

Here we need 3 swing points. The figure below shows what the extension targets look like:

Going back to the figure above, we can see that we can get the swing points from the inverted peak of point A, and the peak of points A, and B. In short, these two points are the V-shape of the minimum points. And when point C is created, then only you get The three important points.

Fibonacci Extension Price Targets

We start from point C.

- The graphic on the left shows the initial price target at 618.0, 8.61% of the length between the two points. A and B, starting at point C (which is a retest of previous altitudes).

- The next target price is 000.1. This price is the real length between points A and B, starting from point C.

- The third price target is at 618.1. The target is the length between points A and B starting from point C.

It is clear that prices will continue to change beyond points A, B, and C. If you want to use Fibonacci extensions to isolate price targets, closing your position (or even entering a new position) is how the calculations are done. It's hard at first, but it gets easier for some because you'll see the same numbers, and the steps will become familiar to you. This process was done by the software used by the traders.


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