Fibonacci numbers form the basis of some valuable tools for mechanical forex traders. Fibonacci ratios are especially useful for determining possible support and resistance levels for forex prices in the near future. Traders like to find high-probability fibonacci numbers forex trading-ups for trades. Yet, beyond simply trading in the same direction of the current trend, it’s difficult to systematically increase the chance of success without using at least one predictive indicator.
Most indicators are lagging indicators, but Fibonacci ratios can be truly predictive. Unlike the commonly-used lagging indicators, Fibonacci numbers can help make predictions about future price moves regardless of the underlying trend. And, time frames of one day work best for me. Time frames of one hour and four hours will also work, although they require a range of other indicators to show appropriate confirmation. I’ve enjoyed good success in using Fibonacci calculations along with a few other carefully-chosen indicators in my mechanical trading strategies. These numbers are named for Leonardo Fibonacci, an Italian mathematician born in the 12th Century.
During his childhood and early adulthood in North Africa, Fibonacci learned the Arabic-Hindu numeral system. I, II, III, IV, V etc. Fibonacci’s teachings were well-received in Europe. The earliest applications of his work included formulas for commercial accounting and bookkeeping, the calculation of interest, the conversion of standard weights and measures, and other arithmetic tools. Under the rules of the Golden Rectangle, for example, the ratio of the long side of the object when compared to the short side will usually be 1.
This proportion is believed to be very aesthetically pleasing to the human eye, and is therefore often used for design purposes. There are several Golden Ratio proportions, all based on Fibonacci values for their dimensions. Other uses for Fibonacci numbers include computer algorithms for Internet searches, and methods for connecting distributed and parallel electronic systems. As well, Fibonacci ratios are used by savvy traders in search of predictive indicators.
The beginning two numbers may be designated as either 0 and 1, or 1 and 1, depending on the chosen starting point. Fibonacci sequences show interrelationships: Each subsequent number in the series will be the sum of the previous two numbers. And, any particular number in the sequence will be about 1. 618 times the size of the previous number.