Yesterday we looked at a different kind of Technical Analysis to use in Forex trading - Elliott Wave Theory.
Today we are going to look at another special approach based on Fibonacci numbers. You have probably heard of the "Fibonacci sequence" - discovered by Finonacci who was a medieval Italian mathematician - you may have met the Fibonacci sequence in the novel The Da Vinci Code. In this sequence each number is the sum of the two preceding numbers: 1,1,2,3,5,8,13,21,34 .... Fibonacci realized that this sequence could be found throughout nature and all branches of thought.
However, what is significant for the Forex trader is the Fibonacci ratios which are derived from the sequence: .236, .50, .382, .618, etc. This is because the oscillations observed in Forex charts, where prices are visibly changing in an oscillatory pattern, follow these ratios very closely as indicators of resistance and support levels. It's a bit mysterious as to why this is so, but it is incredibly helpful once you've got the idea. You can calculate Fibonacci price points or levels for any currency pair in advance, so you know exactly when to enter or exit the trade.
Don't be put off by the very complicated explanations of this that you sometimes see. Ignore these, they are not necessary. You will be able to understand this technique once you have grasped the basics and progressed a bit in Forex trading. Of course you will want to use it in conjunction with other indicators.
There is so much you can learn about Forex trading to help you learn to be successful - if you're trading with Easy-Forex they will teach you all this AND you can trade and make profits while you're learning. Don't forget too there's plenty of information on http://www.bizwrite.co.uk/Forex/forexindex.html
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