The Fibonacci sequence (merely called Fibonacci) is the term used when referring to a mathematical sequence of numbers
Coordinate to the rule of the sequence, all subsequent numbers will be the sum of the ii numbers that preceded it (the sum of the two previous numbers).
Fibonacci has go a powerful tool in Forex and other CFD trading.
Fibonacci levels are used in trading financial avails such as Forex, cryptocurrencies, stocks, futures, commodities and more.
The Fibonacci levels, with the help of its retracements, targets, and extensions, are one of the alltime tools to use in technical analysis.
The strong support and resistance levels (swing points) on the Fibonacci are exact and piece of cake to find. In general, Fibonacci offers clearly defined entry and leave points.
As we go through in this mail service, the Fibonacci tool tin exist used to aid you both find high probability trades and also where you tin accept profit from the market.
NOTE:
Become your Fibonacci Retracement Trading Strategies PDF Download Below.
Complimentary PDF Guide:
Get Your Fibonacci Retracement Strategies PDF Guide
What is Fibonacci Retracement Trading?
Fibonacci retracements are famous among technical traders. This tool is based on the Fibonacci sequence invented past mathematician Leonardo Fibonacci in the 13th century.
The wellnigh important thing in the sequence is the mathematical relationships between the numbers, expressed as ratios.
In Forex and other technical analysis trading, a Fibonacci retracement is obtained by taking two farthermost points (ordinarily a swing high and a swing low) on a currency, stock, or commodity chart and dividing the vertical altitude by the crucial Fibonacci ratios.
The key Fibonacci ratios used in the division are 23.six%, 38.2%, 50%, 61.8%, and 100%.
After identifying these levels, y’all can describe horizontal lines and uses them to identify possible support and resistance levels. This makes it easier to identify possible entry and exit points on a chart.
Fibonacci retracements allow traders to take a more calculated entry and leave in the market.
Have a look at the instance below. Price is in a move higher before it makes a retracement back into the 50% ‘Fibo’ level for a possible long trade entry.
How to Use the Fibonacci Retracement Tool in Metatrader
To employ the Fibonacci retracement indicator in your MetaTrader charts, open your MT4 or MT5 platform and follow these steps;
 Open the MetaTrader trading platform.
 Click on Insert > Objects > Fibonacci.
 Select the Fibonacci indicator.
 Select Fibonacci Retracement and go to your nautical chart. The chart allows you to customize your Fibonacci levels on the MetaTrader.
 In one case on your chart click and hold with your mouse to plot your Fibonacci levels.

Notation:
The Fibonacci levels and descriptions can be added and customized to what you need.
What are the Fibonacci Retracement Settings?
The Fibonacci retracement levels or settings are horizontal lines on a chart that betoken the positions that support and resistance are nigh likely to have place.
The settings are based on Fibonacci numbers. Each level of the settings is associated with a percentage, and the percentage indicates how much the price has retraced from the previous move.
The Fibonacci retracement levels near ordinarily used in trading are 23.6%, 38.2%, 61.8%, and 78.6%.
Unofficially, a lot of traders as well use 50% equally a Fibonacci ratio.
The Fibonacci retracement settings are crucial because they tin can be fatigued between two pregnant price points, like a low and a loftier. This helps you know the entry and leave points in a merchandise.
How to Apply Fibonacci Extensions
Fibonacci extensions are tools that traders employ to plant turn a profit targets or how far the price of an asset might motion after a retracement or pullback has ended.
The extension levels are as well probable areas where the price of an asset might reverse.
In Forex and other financial markets, the Fibonacci extension levels help traders to provide toll levels of support and resistance.
However, they are mostly used to summate how far the price of an underlying asset can travel afterwards a retracement is done. This means that Fibonacci retracement levels are used to know when to enter a trend, while the Fibonacci extension levels are used to identify the cease of that trend.
The number 1.618 is a primal number in the Fibonacci sequence equally it is chosen the Golden Ratio. This number forms the ground of the most of import Fibonacci extension level, which is the 161.eight% level.
In an uptrend, traders e’er endeavor to enter the bounciness point, and they measure out the retracement to find out how far the tendency will go before reaching its height, which is the 161.eight% level.
Meanwhile, in a downtrend, the traders will attempt to enter the market at a correction point and then measure the concluding retracement. This allows a trader to find out how far the tendency could get earlier reaching the bottom, the 161.8% level.
Traders looking for reversals might as well utilise the 161.8% extension level to enter a countertrend trade. However, this technique is most suited to avantgarde traders with years of experience under their belt.
In that location is no special formula for Fibonacci extensions. When the indicator is inserted into a chart, the trader selects three points.
Afterwards choosing the 3 points, the traders depict lines at the percentages of that move. The first point indicates the beginning of a move, the second indicate shows the finish of the move, while the third point is the stop of the retracement confronting the movement.
Simple Fibonacci Retracement Strategy
Fibonacci retracements are usually used as a tendency trading strategy.
In this case, traders accept note of a retracement taking identify within a trend and employ Fibonacci levels to try to make depressionrun a risk entries in the direction of the trend.
Traders that use the Fibonacci retracement strategy expect that the price of an asset has a loftier run a risk of billowy from the Fibonacci levels back in the direction of the earlier gear up trend.
See the example below. Cost is in a trend higher and so trend traders are looking for long trades. Using the Fibonacci tool they see that price has moved back lower into the 50% retracement signal. This offers potential long trading opportunities to get long with the trend.
Source: https://learnpriceaction.com/fibonacciretracementtradingstrategies/