The Fibonacci Trading Strategy
March 20, 2014 – Written by admin1
Fibonacci comes from a well-known Italian mathematician . His contribution to mathematics was the development of a sequence of numbers, each number being equal to the sum of the previous two.
The Fibonacci retracement that is used in trading is computed by dividing the highest numbers in the series. This Fibonacci retracement is a trading tool, separating the charts in four levels, namely 23.6%, 38.2%, 50% and 61.8%. Basically, the charting is the main reason most of traders choose to make use of the Fibonacci trading strategy.
Applying the strategy
The main idea is to look for a trend on the chart and then pullback. The trend will continue the same way, but you have to place a trade at the pullback whether it is a call or a put, this depending on the trend (up or down). Afterwards, you can start using the Fibonacci lines for drawing the direction of the moves, this helping at locating the retracement, meaning the point at which you have to trade. So, for an upward trend, you need to draw the Fibonacci lines in the following way: from the lowest to the highest point of the trend. In case of a downward trend, the opposite strategy applies. You main goal is to find out the level of the price movement that will stall. For higher chances of success, the retracements should start at 50% Fibonacci level or even at 61,8%, an ideal situation.
Don’t get scared when hearing such concepts as the Fibonacci tool or other stuff, because there is nothing difficult about it. Beginners take advantage of this tool also, finding it remarkably useful. And look on the bright side, it is a very good opportunity of learning more and growing as traders. And getting more profitable also.
You really must pay attention and notice the price right before the directions change. The benefits of retracement are emphasized by the predictions traders make into the market, no matter if they sell or buy.
So, if you know how to use the instruments you find in the charts so that you build your own trading system, this will contribute a lot in the success of your trade. The real success, however, depends only on the direction the stock price will follow in the market.
Being successful on this strategy
we can give you is to try trading especially on markets with high volatility, such as Forex, as this offers more opportunities for earning higher profits.
Secondly, before starting applying this strategy, you should get comfortable with using the Fibonacci tool. A great solution would be experiencing the demo account, which allows you getting more insights on the subject, without assuming a very high risk. You should insist on understanding clearly this trading resource, so that you get used with it and start eyeing the 61,8 level immediately.
And finally, as a last tip, you can try setting up the time frames of the chart in accordance with the expiry times you trade, as this will help you a lot when putting in practice the strategy.
Regardless of your experience in trading, you should really try applying this strategy, as it is easy to put in practice, and if traded well, it represents a sure way to considerable profits. So, if you keep learning about it and practice, you will soon get used and find this strategy really easy. The Fibonacci tool is also easy to use, even though at first sight it does not seem so. Just give it time. I am sure that after a couple of trades, you will be fascinated and will keep applying this same strategy.
Try to use this strategy
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