Fibonacci Forex Secrets

Take a look at the sequence of numbers and try to see if you can identify the pattern going on.

1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233...

Have you got it? If you notice, the number to the right is always the sum of the two nearest numbers to the left, added together. So for example, '89' is the sum of '55' and '34', which are to its immediate left. So after 233, what would the next number in the sequence be? In order to work this out, simply add '233' and '144' together and you will come up with '377'.

But what does all of this mean?

This mathematical sequence was believed to have been originally conceived in India during the 6th century. However, an Italian by the name of Leonardo Fibonacci, was far more successful in introducing this sequence to the Western world in the 13th century.

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At first glance, you may feel that this is a interesting sequence. But how on earth will it relate to foreign currency trading? Before we go on to look at forex trading, it is worth noting that this sequence has absolutely everything to do with the Earth as we know it. This is because the Fibonacci sequence is highly prevalent within organic biology. In fact, many living organisms on the planet have been identified as having this sequential formula in their molecular construction, in some way or other.

Fibonacci and Forex

In terms of the forex market this sequence of numbers becomes known as the 'Fibonacci Retracement Level' and this is because it has been recognized that whenever there is a substantial, and sudden rise or fall within the market, the rate often falls back into a more settled position after. This eventual position is known as the 'Fibonacci Retracement Level'.

It's easy to find good recourses for working out Fibonacci Retracement Levels for foreign exchange trading platforms. If you were looking to ascertain the most likely eventual position of a price, using this method, you would need to take a number from the sequence above. Hypothetically, let's take '144' as an example. If you divide this number by the next in line (i.e. '144' divided by '233'), you will always come to a number that can be either rounded up or down to '0.618'.

To find the Fibonacci Retracement Level for a market price, you will need to apply this at the 0.618 point of retracement.

A Myth or Reality?

Okay, so let's cut to the chase here. The Fibonacci forex secret is proven to be accurate in many circumstances. However, you must bear in mind that the price may not fall back to this position every single time. If you use this strategy to carry our your trading, it can be highly beneficial to you. Forex trading platforms wouldn't include it otherwise. But it is imperative to allow your own common sense to prevail here too. If a price clearly shows no sign of settling into the Fibonacci level, base your exit strategy on an another criterion.

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