Post by adamsmiths on Sept 22, 2016 17:15:18 GMT 8
Fibonacci analysis is used under technical analysis to analyse the forex market. It helps in improving both the short term and long term trade positions, improving the performance of a forex trader. Hidden support and resistance are revealed because the key price levels are identified. Fibonacci analysis is used with other technical analysis tools in order to build a strong base to create forex strategies. This strategy not only stands through the test of various volatile situations, but can be used through all markets.
What is Fibonacci?
Fibonacci number was discovered by mathematician Leonardo de Pisa in 12th century. He discovered a numerical sequence that appears all over the nature and other works of manmade art. These numerical sequences, also known as Fibonacci, are used in the financial markets to earn profit. They help in describing the connection that occurs between price waves within trends. They also show how far the waves will continue without reversing. This also helps in testing the previous levels.
Theory of Fibonacci
The Fibonacci number sequence appears as follows:
0,1,1,2,3,5,8,13,21,34,55,89,144 and so on.
If you check it properly, you are going to find a pattern. After 0 and 1, every number that appears in the sequence is the sum of the previous two numbers. The sequence does not have a definite end and can extend to infinity. If the numerical sequence is calculated, it is seen that each number is 1.618 times greater than the preceding one.
1.618 Or Phi is also known as the golden ratio. 0.618 is the inverse of the golden ratio. It is believed that this golden ratio appears regularly in the natural world, art and architecture.
Fibonacci Retracement
A Fibonacci retracement refers to an area or a point when prices stop going lower or the area or point when prices stop moving higher. Retracement levels are indicated through horizontal lines. During the key Fibonacci levels, the area of support and resistance are revealed as the trend continues to move in its original direction. The highs and lows help in creating Fibonacci levels. A trend line is drawn between the high and low points to derive the Fibonacci levels. The vertical distance travelled is divided by the main Fibonacci ratios- 23.5%, 38.2, 50%, 61.8% and 100%.
Fibonacci retracement is popularly used by technical analysts. This tool helps them spot the place where transactions will prove to be strategically beneficial. It also helps to find target prices and stop loss points. Fibonacci retracement lines are also significant because new support and resistance levels appear near the Fibonacci retracement line just after major price movements.
Fibonacci extensions
The places of support and resistance are predicted using Fibonacci extensions. Fibonacci extensions are used under Fibonacci retracement. In Fibonacci retracement the distance in divided into different sections till 100% level. Extensions are drawing levels above 100% using Fibonacci ratio. These extended levels help the traders to identify the areas that are profitable. 161.8% level is a popular Fibonacci extension used by traders. When the ascending triangle breakout, a price target is set, traders calculate the target by multiplying the ratio 61.8% with the vertical distance of triangle. The upper resistance level of the triangle to the product obtained.
Fibonacci extensions can be used in any time frame. Future price waves are generated if the extension tool is used on the present price wave.
Fibonacci channels
Fibonacci channel is a variation of Fibonacci retracement pattern. The trendlines do not run horizontally rather the lines are diagonal. Horizontal Fibonacci lines are used along with Fibonacci channels.
What is Fibonacci?
Fibonacci number was discovered by mathematician Leonardo de Pisa in 12th century. He discovered a numerical sequence that appears all over the nature and other works of manmade art. These numerical sequences, also known as Fibonacci, are used in the financial markets to earn profit. They help in describing the connection that occurs between price waves within trends. They also show how far the waves will continue without reversing. This also helps in testing the previous levels.
Theory of Fibonacci
The Fibonacci number sequence appears as follows:
0,1,1,2,3,5,8,13,21,34,55,89,144 and so on.
If you check it properly, you are going to find a pattern. After 0 and 1, every number that appears in the sequence is the sum of the previous two numbers. The sequence does not have a definite end and can extend to infinity. If the numerical sequence is calculated, it is seen that each number is 1.618 times greater than the preceding one.
1.618 Or Phi is also known as the golden ratio. 0.618 is the inverse of the golden ratio. It is believed that this golden ratio appears regularly in the natural world, art and architecture.
Fibonacci Retracement
A Fibonacci retracement refers to an area or a point when prices stop going lower or the area or point when prices stop moving higher. Retracement levels are indicated through horizontal lines. During the key Fibonacci levels, the area of support and resistance are revealed as the trend continues to move in its original direction. The highs and lows help in creating Fibonacci levels. A trend line is drawn between the high and low points to derive the Fibonacci levels. The vertical distance travelled is divided by the main Fibonacci ratios- 23.5%, 38.2, 50%, 61.8% and 100%.
Fibonacci retracement is popularly used by technical analysts. This tool helps them spot the place where transactions will prove to be strategically beneficial. It also helps to find target prices and stop loss points. Fibonacci retracement lines are also significant because new support and resistance levels appear near the Fibonacci retracement line just after major price movements.
Fibonacci extensions
The places of support and resistance are predicted using Fibonacci extensions. Fibonacci extensions are used under Fibonacci retracement. In Fibonacci retracement the distance in divided into different sections till 100% level. Extensions are drawing levels above 100% using Fibonacci ratio. These extended levels help the traders to identify the areas that are profitable. 161.8% level is a popular Fibonacci extension used by traders. When the ascending triangle breakout, a price target is set, traders calculate the target by multiplying the ratio 61.8% with the vertical distance of triangle. The upper resistance level of the triangle to the product obtained.
Fibonacci extensions can be used in any time frame. Future price waves are generated if the extension tool is used on the present price wave.
Fibonacci channels
Fibonacci channel is a variation of Fibonacci retracement pattern. The trendlines do not run horizontally rather the lines are diagonal. Horizontal Fibonacci lines are used along with Fibonacci channels.