Forex trading using Fibonacci sequence:

Fibonacci sequence involves the use of Fibonacci retracements patterns technique in order to recognize the reversals in the prices of a currency pair. The Fibonacci sequence is a series of numbers where each successive number is a sum of the previous two numbers and it was given by an Italian mathematician by the name of Leonardo Pisano.

These numbers have their utility in Fibonacci Forex trading techniques, especially for use in technical analysis. These numbers are used to show how the value of a currency pair pulls back a few percentages just before there is a reversal in the currency price direction. These retracements generally occur at 38.2%, 50% and 61.8%, something known as the “golden ratio”.

In reality the 50% level is not from the Fibonacci sequence, in fact it has been used by traders to depict the tendency that there would be reverse after the pair has pulled back half of the previous move.

What a trader implementing such a trading strategy would need to do is look out for a currency that is beginning to pull back. After this has been done, retracement levels can be plotted on the chart of the currency pair. These levels can be used to determine whether it is best to go in long or short in the currency pair in question.Most of the charting softwares have features that can plot Fibonacci grids. But if the feature is not present, the grid can be draw manually too. You need to create a grid that encompasses the swing point high and swing point low of a currency swing. After this has been done, you need to determine the range between the high and low points and then multiply these by the Fibonacci ration. You then need to subtract the resulting number from the swing point high to get the desired Fibonacci level. Apart from this you can make use of Fibonacci time levels to determine the time at which there would be reversal in the trend of a particular currency pair. These can be used to determine the best time to enter and exit a trade and thus earn a lot of profit.
Most of the experienced currency traders understand that Fibonacci support and resistance levels are not exact values but rather they are indicators which can be used to determine the best time to enter and exit trades. This is the reason why many traders generally use other retracement levels along with Fibonacci retracement levels to determine the price reversal in a currency pair