If you haven’t realized it yet, Fibonacci forex trading is the basis of many forex trading systems used by professional traders around the world. These systems are all based on the historically famous Fibonacci ratios (.236, .50, .382, .618, etc.).
Each trading system can be focused on any of these particular ratios, and with the help of other minor indicators the trading system can make the pinpointing of the entry and exit levels as easy, accurate and profitable as possible.
One of the most widely used Fibonacci ratios is the 0.382 ratio. Currency prices are continually changing and they follow an oscillatory pattern with peaks and valleys. The limit of the peak is usually called a resistance level while the valley is usually called a support.
You can find the 0.382 ratio level in the following way: first, measure the size of the drop or rise over your time of interest. Once you have that value you multiply this by 0.382. Now depending on what you are looking at, a rise or a drop on the price of the particular "currency pair" you are trading, you will add the last value you calculated to the total drop or subtract the value from the total rise.
These operations will give you the 0.382 Fibonacci ratio level, either for a rise or a drop on the chart you are analyzing. Once you have the value you can then start planning the strategy you will follow. For the 0.382 ratio level calculated for a recent rise in the "currency pair" exchange price, your calculated level will be a highly probable support and for the case of a level calculated for a recent drop of the prices your level will be a highly probable resistance.
Knowing this ahead of the market and having the proper secondary indicators, will give you a huge advantage over most forex traders.That’s why Fibonacci trading is so profitable and successful around the world.
Free chapters of a forex day trading system can be downloaded at www.1-forex.com in case you are interested in learning more about Fibonacci forex trading.
Written By: Adrian Pablo
