Fibonacci’s Miraculous Ratio
So who was Fibonacci and how is he related to Forex?
Well, Fibonacci was an Italian mathematician, one of the most talented ones in the Middle Ages. He was the inventor of the now famous “Fibonacci sequence”. This sequence is a series of numbers where each number is the sum of the two previous numbers, for example: 1, 1, 2, 3, 5, 8, 13…
In Forex trading the Fibonacci ration is derived from this sequence: .236, .50, .382, .618 etc. This ratio is common in nature structures and also appears in man-made ones. The way in which this sequence can actually benefit Forex traders is in the way forex charts changes. The movements are very similar to the Fibonacci ratio so you can use it to have a better indication to resistance and support levels. Although it's not a 100% accurate, it's close enough.
The trick to this is to calculate the price levels according to the Fibonacci ratio and then you will know ahead of time what are the preferred enter and exit points. Knowing these points before they occur helps the trader make more money.
Although many traders avoid using this technique because of the complexity of it, it is not so complex once you learn how to use it.
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