Strategies for Trading Fibonacci Retracements

Fibonacci numbers trading

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Let us first start by introducing you to the Fib man himself…Leonardo Fibonacci. Actually, he was a famous Italian mathematician, also known as a super-duper uber ultra geek.

After the first few numbers in the sequence, if you measure the ratio of any number to the succeeding higher number, you get. For example, 34 divided by 55 equals.

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If you measure the ratio between alternate numbers you get. You have now just experienced the Fibonacci Sequence!

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Then the second and third numbers are added again to form the fourth number. The ratio of the last number over the second-to-the-last number is approximately equal to 1.

How to Trade Fibonacci Retracements

It appears many times in geometry, art, architecture, and even on Sonic the Hedgehog. With all those numbers, you could put an elephant to sleep. Your charting software will do all the work for you.

He has provided education to individual traders and investors for over 20 years. They will often form trends in one direction or another and then bounce back against those trends.

Fibonacci retracement levels Fibonacci numbers trading on the theory that after a big price moves in one direction, the price will retrace or return partway back to a previous price level before resuming in the original direction.

Traders use the Fibonacci retracement levels as potential support and resistance areas. Since so many traders watch these same levels and place buy and sell orders on them to enter trades or place Fibonacci numbers trading, the support and resistance levels tend to become a self-fulfilling prophecy.

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Traders use the Fibonacci extension levels as profit taking levels. Again, since so many traders are watching these levels to place buy and sell orders to take profits, this tool tends to work more often than not due to self-fulfilling expectations.

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Most charting software includes both Fibonacci retracement levels and extension level tools. A Swing High is a candlestick with at least two lower highs on both the left and right of itself.

A Swing Low is a candlestick with at least two higher lows on both the left and right of itself.

Some of these levels and descriptions may not be in your trading platform. To add them, simply click the Add button on the right. Now let's look at how to plot Fibonacci levels on to your chart and what they actually mean. Left-click and hold down at the bottom of the cycle, X. While holding the mouse button down, drag the line to the top of the cycle, A.

You got all that?