See if you can ascertain the pattern that is going on in the below sequence of numbers:
Have you got it yet? When you’re looking at the numbers you might notice that the number that is to the right is always the sum of the two numbers that are to the left. So 1, 2, 3 and 3, 5, 8 and so you, you get the picture. So after the 233 that we left off on, what would the next number in that sequence be? To reach that amount we simply take the two numbers that would be to the left of the next number, being the 144 and 233 to get 144 + 233 = 377.
So you get it now, but the question remains, what does all of this actually mean? More importantly, you’re probably thinking, why should I care?
The above mathematical sequence is thought to originally have been conceived in 6th century India, however, an Italian by the name of Leonardo Fibonacci, had far greater success when it came to introducing this sequence to the Western world in the 13th century.
When you first look at it you’re likely thinking that this is an interesting sequence, however, how is this going to have any help whatsoever when it comes to trading foreign currency?
Before moving onto Forex trading, it’s definitely worth noting that the Fibonacci sequence has utterly everything to do with the Earth today as we identify it. But how is the question? The reason for that is that the sequence has a high level of prevalence within organic biology. As a matter of fact, many of the living organisms on our planet have actually been identified as having, in one way or another, this sequential formula within their molecular construction.
Fibonacci and Forex
When it comes to the Forex market though, this number sequence stops being just the Fibonacci sequence and goes to something that’s known as the Fibonacci Retracement Level. The reason for that is that there’s actually been empirically proven that whenever there’s a considerable and abrupt rise or fall within the market, the rates will most often fallback into a more settled position after that rise or fall. The eventual position that the position falls to is known as the Fibonacci Retracement Level.
It’s very simple for you to find some good remedy when it comes to working out the Fibonacci Retracement Levels for the foreign exchange trading platforms. If you happened to be looking at ascertaining the most likely eventual price for a position by using this method, you’d need to take a number from the above sequence.
Let’s run a hypothetical example. We’ll use 144 for our example. If you take that number and then divide that number by the next in line number, so 144/233 you’re always going to come up with a number that can either be rounded down or up to the number “0.618”.
In order to find out the Fibonacci Retracement level for a market price you’ll need to apply this at the 0.618 level point of retracement.
Is It Myth or Reality?
So, let’s get to the bottom line and cut to the chase. There are many circumstances where the Fibonacci Forex “secret” is proven to be quite accurate; however, you need to keep in mind that the price might not fallback to this position each and every single time.
With that in mind if you can use this strategy to carryout your trading, its’ something that can be very beneficial to you. If this wasn’t the case the Forex trading platforms would never include it. With that, make sure you keep this in mind, it’s extremely essential that you allow your common sense to always triumph. What this means, is should the price clearly show that it has no sign to ever settle back to the Fibonacci level, you need to base an exit strategy and base it upon another criterion.