Effective Ways Of Using Fibonacci Tools – Fibonacci retracement are some of the most important tools trader’s use.
What is Fibonacci? Fibonacci Fan strategy, and how to use fibonacci tools properly with three methods that will boost the effectiveness of your forex trading strategy, as well as some other important topics that are useful in relation to Fibonacci tools.
In an UPTREND, traders will look at the lower support points (S1, S2, S3) and wait for it to break.
Leonardo Bonacci aka Fibonacci
Leonardo Bonacci was born in Pisa around 1170, as the son of a wealthy merchant. He was an Italian mathematician considered to be the most talented western mathematician of the Middle Ages. His book ‘Liber Abaci’ introduced the Hindu-Arabic numeral system. – Effective Ways Of Using Fibonacci Tools
What is Fibonacci?
The Fibonacci Sequence refers to a set of numbers that begins with either the number 1 or the number 0, succeeded by another number 1, and then the pattern continues based on the rule which states that: all subsequent numbers (or Fibonacci numbers) will be equal to the amount of the two numbers.
Effective Ways Of Using Fibonacci Tools
These days, Fibonacci levels are used in all types of trading including stocks, futures, commodities, cryptocurrencies, EUR/USD is an example as well as and also Forex trading. The Fibonacci levels, with its re-tracement levels and targets, are one of the best tools in the entire field of forex trading analysis. Its strong support & resistance levels are exact and explicit. Most importantly, Fibonacci offers very defined and precise entry and exit spots.
Extra reading: Beginners Guide to Candlestick Trading
Fibonacci Sequence Levels
The Fibonacci sequence numbers are as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 144, 233, 377, 610, 987, 1597, etc. This series of numbers is created by always adding the last two numbers together:
- 0 + 1 = 1
- 1 + 1 = 2
- 1 + 2 = 3
- 2 + 3 = 5 etc
If we apply it to higher numbers, we will still have the same perfect sequence.
- 89 + 144 = 233 etc
You might be wondering why these Fibonacci sequence numbers are so important.
- That the Fibonacci sequence numbers are strongly respected on the charts, as a vast majority of traders use them.
Fibonacci Fan Strategy
Very often, the main supporting level on the Fibonacci Fan is the 61.9%. By applying the following rule, we might have a good chance for a pure base line on Fibonacci Fan trading. Fibonacci Fan is the default indicator on MetaTrader 4 (MT4) and Metatrader 5 (MT5), and you can assess it directly.
Fibonacci Expansion Custom Levels
Fibonacci Expansion is a default tool available in MetaTrader, which is also crucial for price action targets. We will now introduce the essential Fibonacci Expansion levels that you might want to use with different trading strategies. In order to add custom levels to the Fibonacci Expansion tool, you first need to select the tool from the drop-down menu in Meta Trader 4. This is how you do it:
The characteristics of these levels are important for the price analysis and will add up to 1-2-3 pattern trading.
- Fibonacci Expansion 61.8
This is the first important level of the tool. It doesn’t usually act as a strong support or resistance when the price approaches it directly, but rather, when the 61.8 support or resistance has already been broken (backward approach). It then transforms into a strong S/R level. – Effective Ways Of Using Fibonacci Tools.
- Fibonacci Expansion 100.0
This is considered to be a weak Support & Resistance level. If, for example, the 1-2-3 pattern point 3 equals or is close to 61.8 of 1-2 retracement, the FE 100 should be a strong S/R level.
A very strong S/R level that possibly marks the end of a correction.
- Fibonacci Expansion 200
Possibly the strongest S/R level that marks the end of a correction, a price reversal, and the change of the trend.
Fibonacci 50.0 with the EMA Channel
This strategy is easy to apply. It uses the following indicators that forex introducing brokers are known for using for clients.
Long Entry Position
- Check if the slope of the channel is sloping up
- The price needs to be above the channel
- Place a long entry by scaling in.
Short Entry Position
- Check if the slope of the channel is sloping down
- The price needs to be above the channel
- Place a short entry by scaling in .
Targets are placed at Admiral Pivots, while the stop-loss is placed below the last swing low (for long trades) and above the previous swing high (for short trades). For example, if you decided to enter with 0.3 lots. In order to scale in properly, you need to divide 0.30 lots by 3. If the price doesn’t make a re-tracement to 38.2 and 50.0, you will probably have only ⅓ of the trade running (23.6). Profits can grow significantly and losses may be lower if you use the scaling-in technique. – Effective Ways Of Using Fibonacci Tools.
Traders that don’t have the hours to devote to learning the ropes can instead consider the use of forex trading signals.