How To Use Fibonacci Numbers in Forex and Stock Trading

[Frederick Eddy]

Fibonacci is a sequence of numbers discovered by Leonardo Fibonacci,
an Italian mathematician: 0, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144,
233, 377, 610, 987, 1597, 2584, 4181, 6765, 10946, 17711, 28657,
46368, 75025, 121393 …….
As you see the numbers are started by 0, followed by 1, and then the
third number is calculated through adding 0+1 (the first and the
second number). Then for getting the forth number (3), the second and
third numbers should be added (1+2) and …….
It was easy so far, isn’t it?
Now if you measure the ratio of each number to the next one, you will
have the Fibonacci Ratios that are the same numbers (levels) we use in
our Forex or stock market technical analysis: 0.236, 0.382, 0.500,
0.618, 0.764 …….
To use these numbers in technical analysis you don’t have to make any
calculation and you don’t have to even memorize them because all the
trading platforms let you draw the Fibonacci levels and they have
everything ready to use.
The only thing you should know is how to use the Fibonacci levels in
the technical analysis.
The most important thing you have to know is that the Fibonacci levels
act as support and resistance. When the price goes up, they act as the
resistance and visa versa. Also like ordinary supports and
resistances, when a Fibonacci level is broken as a resistance, it can
act as a support and to be retested. It is the same as when a
Fibonacci level becomes broken as a support (it can act as a
resistance then).
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