|
 
Fibonacci NumbersHave you ever heard of Leonardo Fibonacci? No, he didn't paint the Mona Lisa. And he's not the guy behind the counter at Vinnie's Pizza. Fibonacci was a well-known Italian mathematician who lived from around 1175-1250. He made great contributions to the world of mathematics, including introducing the decimal system to Europe. He also studied a sequence of numbers that has since become known as the Fibonacci Numbers, or the Fibonacci Sequence. The Fibonacci Sequence start with a 0 and a 1, and each new number is the sum of the two previous numbers (0 + 1 = 2, 1 + 2 = 3, 3 + 2 = 5). The first numbers in the sequence are as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144...and so forth into infinity. Fibonacci found that these series of numbers and their ratios to one another were prevalent throughout nature and can in fact be seen all around you. Ok, ok, so what does this have to do with forex trading? Well, quite a bit in fact. You see the ratios that are found in the Fibonacci numbers can be seen in the price movement of currencies (as well as stocks and other investments). Without boring you any further, I'll give you the big 3 numbers that you should remember: 0.382, 0.500, and 0.618. There are others, but these are the most significant. These numbers are used to calculate "retracement levels", which are used by many traders to determine when to place buy and sell orders. Here's how it works: Assume the price of a currency pair (or a company's stock for that matter) is trending upward. History shows us that prices tend to hit a peak, go into a temporary reversal, and then resume the trend. The reversal is where Fibonacci numbers come in. The price of a currency that is trending can be expected to reverse back to one of the Fibonacci numbers and then bounce back to continue the trend. If you forecast this correctly you can buy in just before the upward trend continues and score big profits. The online trading platform you use should be able to chart the Fibonacci numbers for you. You just draw a line from a low point to a high point, and the retracement levels are automatically mapped on the chart for you. Of course, its not quite as simple as trading when the price hits a Fibonacci number. There are other things to consider: You don't know which retracement level the price will stop at. If you choose .382 and it drops to .618 you could lose a ton of pips. Similarly, if you choose the wrong low/high points, the retracement levels will be all out of whack. And quite frankly, as accurate as they can be at times, sometimes Fibonacci numbers just don't work at all. There are many variables at play in the forex market. You can't rely solely on one method to predict price movement.
Recent Forex News
Forex Technical Analysis Reports (ActionForex.com) Technical analysis reports from selected analysts around the world on forex market. Available in ActionForex.com Euro, British Pound, Australian Dollar may Rebound Against US Dollar The Euro continues to trade within a progressively narrower wedge formation against the US Dollar, and the next several days of price action will likely dictate Euro/US Dollar direction for the next several weeks of EUR/USD trading. Already we see the EUR/USD attempting yet another break to the topside after... Australian And New Zealand Dollar Breakout Potential Draws Analysts The Aussie and kiwi dollars have come under renewed selling pressure through the end of this week. Heading into the weekend, ranges are clearly growing progressively mature and strained, while a few crosses have already made the intial push for a breakout. A resolution to this congestion period must come... FX Thoughts for the Day AUD-USD @ 0.6217/19...Long term range of 0.60-0.70. Aussie has risen sharply taking Support of the 8-SMA on the hourly chart during the Asian and European session and now has started to come off the highs of the day. Overall Aussie would consolidate between 0.60 to 0.70 in the longer term.... Daily Technical Strategist While EUR remains trapped in its triangle pattern as well as the 1.2330 and 1.3298 levels, break out of the mentioned triangle continues to dominate the pair's price action. Break of the 1.2330 level is envisaged to be triggered as its present consolidative moves remains corrective of its decline started... Technical Analysis Daily: USD/JPY The U.S. currency descended against the Yen yesterday. Bottom level was reached at 93.54, and closing the day at 94.18. During the Asian session the currency couple traded around 94.70, due to the stabilization of financial markets overnight. In the short term we see possible consolidation in downward direction. The... Newsfeed display by CaRP Forex Fundamental Analysis Reports (ActionForex.com) Fundamental analysis reports from selected analysts around the world on forex market. Available in ActionForex.com Canada: Consumer Price Inflation Slows Dramatically in October Similar to the U.S., Canada has experienced a sharp decline in the rate of inflation. In October, consumer prices plunged 1.0% M/M – the biggest one-month decline since 1959. On a seasonally adjusted basis, the headline number fell by a more modest 0.5% on the month. Nonetheless, prices are still... Retrieved Carry Trades The fifteen nation currency managed to climb higher against the US dollar as investors' tended to buy back the high yielding assets; the euro reached a high of 1.2637 levels after it breach 1.2567 trend line but it did not have enough momentum to climb back up to 1.2666 levels.... Forex Fundamental Outlook The common currency continued its ascent as traders continued to punish the greenback for a variety of factors. First, there is increasing talk about deflation hitting the U.S. economy. St. Louis Fed President Bullard last night said the Fed may need to rely on “quantitative easing” to fend off deflation... Euroland: Very Weak PMI Should Spur ECB to Cut Rates Dramatically Yet again, flash PMI for Euroland fell unexpectedly sharply from the previous all time low, and our below-consensus estimate proved too optimistic. This is clearly worrying - the composite PMI is now signalling close to -0.4% growth q/q (-1.6% annualised). It is clear that Euroland is facing a recession that... Dollars Bulls Now Owe It to Tight Coupling I've talked about the market process plenty of times before. Specifically how it's able to consistently, over time, produce extremely efficient interaction among human beings in the marketplace, in the business place and in life. I try to make it sound simple. I try to boil it down to the... Newsfeed display by CaRP |
