Fibonacci Retracements – From Rabbits To Profit
Fibonacci retracements are useful in Forex trading. These calculations are based on numbers that repeat themselves in the Forex market. The retracements attempt to measure the most likely points where a currency will pull back to within its normal range (aka “retrace”). There are charting software programs with Fibonacci functions that you can use to perform this analysis for you, or you can let your Forex trading firm do the calculations. Most of them will be happy to do so, since when you make money, they make money.
Fibonacci retracements can be used in both uptrend and downtrend markets. You just need to look for retracement levels that confirm to the patterns you use in your trades. You will need a good working knowledge of technical indicators, which are analyses of past market data, to use retracements successfully. The two main types of technical indicators are trend followers and oscillators.
Trend followers show you the strength and direction of a current trend in Forex trading. You may choose to enter the market at a position where the trend indicators show a strong swing either up or down in the market. Moving averages are the most common type of trend indicators used in Forex trading, though some people prefer to use Bollinger bands.
Oscillators are indicators that show when the market is overbought or oversold during short-term periods. These can help you determine the best times to enter or exit the market. The most commonly used oscillators are the relative strength index oscillator and the moving average convergence difference oscillator. The stochastic oscillator is also sometimes used.
The most important thing to remember when getting into the Forex market is to practice as much as you possibly can before entering the trading field with real money. Forex is a fast moving environment, and you can easily lose a lot of money if you don’t know what you’re doing. However, if you are well versed in how it works, you can easily make some spectacular profits. Whether you use the Fibonacci retracements or some other type of analytical tool (or a mix of several), just be sure you know how to use them properly, and you could soon be raking in a lot of money.
By: Alberto Pau
