HOW TO USE FIBONACCI TECHNIQUES FOR PROFITS IN FOREX TRADING.

Let us welcome "Mr. Fibonacci" to our trading techniques for more profits. I want you to sit back and learn the concepts of trading using Fibonacci price relationship to identify high probability of profits and relatively low risk trade setups. In this article I will explain what this trade setup is and then provide some examples to show how you might use this strategy in your trading, coupled with the wave principle.

When Fibonacci price clusters are used as trading strategy, a setup or possible trading opportunity occurs when you see a coincidence of at least three Fibonacci price relationships coming together within a relatively tight price range on the chart. This coincidence of price relationships defines a key price support or resistance zone for a potential trade entry. Fibonacci price retracements, extensions and price projections are made from the key swing high and low on the chart for the day. Swing highs and lows are recent highs or lows of the day.

Now, to make price projection using Fibonacci, we need to use defined ratios by the Fibonacci number series, and the generally used ratios are 382, 50, 618, 786, 1.00, 1.272 and 1.618 at times, 236, 2.618 and 4.236 are used to confirm other levels. The key ratios can be applied directly to the time axis of the market to identify times when the market is more likely to reverse trend and you must also consider some candlestick pattern like Hammer, Hanging Man, Spinning Top, Doji, Morning stars e.t.c. This may be the subject of a future article anyway.

You should be informed that using Fibonacci alone to predict the market direction is unreliable because it might be 50% accurate. However, when used in combination with other technical indicators or studies, Fibonacci becomes up to 95% accurate! That's the probability of a good trade.