Leonardo of Pisa, aka the mathematician “Fibonacci”, published his Fibonacci sequence in 1202. Fibonacci came upon his now very famous sequence of numbers when he was trying to breed rabbits and figure out how many pairs of rabbits he would have at the end of one year based upon their breeding behavior. This is just the kind of no-nonsense approach that Forex traders are into.

Mistakenly many individuals consider mathematical abstraction as frivolous; however it is rooted into real world mathematical applications. The Fibonacci sequence is useful for making us aware of and then explaining those hidden patterns around us daily.

How can this be applied to investing? Very astute investors understand that there are hidden patterns in the stock market–based on the mass of investors’ behavior. “Buy low and sell high” and “The best time to buy is when there’s blood in the streets” are but two investment aphorisms that not only work, but also come from understanding hidden patterns of the investment markets.

The reason that investment market patterns are so well hidden is because “up close” they cannot be seen. Day to day, hour to hour fluctuations in the investment markets cannot be predicted with any accuracy. But certain overall trends that extend over longer periods of time definitely can be. And savvy investors, including Forex traders, have successfully been using Fibonacci’s number sequence to take advantage and make big profits.

Using the Fibonacci sequence involves a series of numbers. Each following number is the sum of the two numbers before it. It progresses like this 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, and into infinity. There are numeral interrelationships within these numerals. For example, take any number; it is roughly 1.618 times the number before it. Anciently the Greeks found number 1.618 reprehensive of the golden ratio which is the supreme essence of balance. This balance is the fundamental strategy of profitable investing

The most common applications of the Fibonacci sequence for investment purposes are retracements and arcs.

Fibonacci charts are created through a technique comprising three curved lines that are drawn for the purpose of anticipating key resistance and support levels as well as areas of ranging. First, an invisible trendline is drawn between two points (typically these are the high and low for a given time period). Then, three curves are drawn so as to intersect this trendline at the key Fibonacci levels of 38.2%, 50%, and 61.8%. Transaction decisions are made at the point where the price of the asset crosses through these key levels.

Next is the retracement – this is when the movement of a stock or other traded commodity reverses direction; this is a reversal which is stronger than the prevailing trend of the stock’s movement. Retracement patterns are looked at closely by investors; a Fibonacci retracement can be used to analyze the odds of a commodity’s price having a larger than average retracement before continuing back on the direction it had before reversal. The trendline is typically drawn between two extremes and is divided vertically by the Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.

The Fibonacci retracement is widely used by sophisticated traders to find: strategic places for transactions to be placed; target prices; and stop-losses. Other technical tools including Tirone levels, Gartley patterns, and Elliott Wave theory all make use of retracement.

The reason that the Fibonacci sequence is used in investing is simple: it works! Forex traders in particular in particular seem to find it useful in making profitable trades.

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Source: Currency Trading

This is how many experts trade in forex. As they see an opportunity in the future of a particular economy that’s affecting it’s currency, they try to capitalize on it.

The goal is the buy the currency at the lowest possible price and wait for the rates to go up and then sell it for a profit. Since forex rates are dependent on a large number of factors…it could take some time before you see any shifts in prices. However, the beauty of Forex Trading is that you can earn a profit whether a currency is low or high. This is big business for large corporations as it’s one of the quickest ways to build their assets.

You must stay close to the trends that’s happening everyday if you’re only looking for short term profits.  Day trading is not that simple and takes time to monitor and analyze to become truly successful. Long Term Profits however are easier to obtain because all you need to do is look out for all the big changes in the country’s interest rates, laws, news and so on.

Many claim that even the unemployment rate can play a major role in changing currency rates, but you should always think of it as part of the overall strategy.  However, interest rates are the number one factor affecting currency value. By keeping and eye on this information, you will begin to see opportunities in the FX market and take advantage of the changes to earn a share of these transactions.

There is no one true way to be successful in forex. Patience is definitely the key and if you’re willing to take the time to learn forex trading the right way, you will potentially make more profits.  You will begin to understand the whole picture…..while developing killer forex strategies and be able to grab opportunities as they come within the shortest period possible.

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