23 Feb 2008 03:21:11 | Adrian Pablo
It was mentioned in a past article that Fibonacci forex trading
is the basis of many forex trading systems used around the world
by profitable forex traders. These systems are all based on the
famous Fibonacci ratios (.236, .50, .382, .618, etc.) and each
of them can specialize in a particular ratio along with other
minor indicators in order to make the pinpointing of the entry
and exit levels as accurate and profitable as possible.
One of the widely used Fibonacci ratios is the 0.382 ratio. As
it can be easily seen on any forex chart, 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.
In order to find the 0.382 ratio level what you do is, 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 in order to make a high probability profit from this
valuable information. 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, and that's something any trader would like they could
count on. That's why Fibonacci trading is so widely accepted
over the world, and of course, why it's so profitable and
successful.
About Author :
Adrian Pablo; Forex trader
and freelance writer.
