How To Use Fibonacci Numbers To Boost Your Forex Trading Profits
by James Kupe
When Leonardo Fibonacci developed his unique number series around the year 1200, he created a sequence of numbers that could continue to grow and reproduce, basically indefinitely. Many forex traders use these numbers as a trading aid, to help them identify high probability areas of support and resistance.
Fibonacci currency trading has come in and out of favor over the years, as has the way people have incorporated the number sequence into their trading plans and decisions. So how does a typical trader incorporate this powerful sequence of numbers into their trading plan?
The easiest place to start evaluating Fibonacci as an aid to trading is when it comes to price ranges and retracements in the market. And if you can get your head round all of this, you might even find yourself becoming a more successful trader by using this powerful tool in the right way.
At it's core, using Fibonacci in a currency trading environment uses the numbers in the sequence to help identify price objectives and stop loss levels for your trades. Some traders contend that positioning stop losses based on Fibonacci price points can take a lot of the risk out of trading.
To some extent this is true, because by knowing these important price levels, you can keep losses small because in many cases, you are putting them very close to the market. As an example, stop loss levels based on Fibonacci numbers would be below retracements of 38.2%, 50% and 61.8%. With stop levels pre-determined before entering the trade, you know how much risk you are taking, and you can use correct position sizing and manage your trade based based on these levels as well.
The downside of this argument is that you can often get taken out of long-term profitable positions by having your stop loss too close to the market based on these price levels. I guess you have to put your stops somewhere, but a Fibonacci price level is not the best option in every market situation.
Fibonacci numbers are also used for setting profit objectives, or for analyzing the market to see if a trade is worthwhile. Typical Fibonacci price objectives are 100%, 132% and 162% of the previous range in the direction of the trend. Having price targets and then taking profits when they are achieved can give you a great sense of accomplishment in a market as unpredictable as forex.
So the bottom line is that Fibonacci numbers and percentages when applied to forex trading can help you get more accuracy in your entries and exits, and can also help with reducing risk. If you are trading fun and excitement, you are in this business for the wrong reasons. Safety and increased profits are the real objective, and adding a bit of Fibonacci to your trading can certainly help with that.
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New Unique Article!
Title: How To Use Fibonacci Numbers To Boost Your Forex Trading Profits
Author: James Kupe
Email: localmarketingarticles@gmail.com
Keywords: complete currency trader review, complete currency trader, currency trading course, trading currencies, forex trading, forex, foreign exchange, trading, investing
Word Count: 466
Category: Hobbies
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