Fibonacci Method in Forex

Posted on February 14, 2019 at 04:07 AM CET Forex News

A Fibonacci method is considered to be one of the most used best Forex trading options. This is due to its efficiency in counting the trend reversal point, though some might state that the method is pretty complex in usage.

The method highlights the point where the market gets into the balance after a specific movement upwards or downwards and gets to its regular direction. This breakpoint allows the experts to count the support and resistance levels.

If we go back to the currencies, we will see that they tend to pull back at some specific percentage of their previous move. In technical terms, this is being referred to as a retracement. For Fibonacci, there is certain useful retracement level, that is 0.382 %, 0.50 %, 0.618 %. They are being used to determine the support and resistance levels. As a result, you get a chance to buy or sell the currency at an optimal value.

In addition to this retracement point is also serving as a good chance to count the risks of the trading. That is why the stop points are being drowned close to the retracement points so that the loses in case of the cross-movement of the currency will end up within the least possible level.

In the case of the Fibonacci method, the profit is more targeted, as you can simply use the extensions levels to set the profit. The most important Fibonacci extension levels are 100 %, 138.2 %, 161.8 %. Their usage allows maximizing the profit correspondingly with the market. The forex trader needs to identify at what point of extension it’s more effective to place an order for buying or selling.

Overall, the Fibonacci method is quite useful, but it’s always worth to combine it with other methods. Sometimes the markets do not go with their typical direction due to significant changes in the original countries of the currencies, at the same time Fibonacci is more useful in case of the dominant currency markets, while for the flowing ones it’s advised to have the economic changes and shift determination indicators as well.

To start using the Fibonacci method, you should count first the top and bottom prices of the prior trend. Mentioning these prices in the Fibonacci software tool you will be able to get the rest of the indicators based on those.