It was mentioned in a past article that Fibonacci forex trading is
the basis of many forex trading systems used around the world by
profitable forex traders. These systems are all based on the famous
Fibonacci ratios (.236, .50, .382, .618, etc.) and each of them can
specialize in a particular ratio along with other minor indicators in
order to make the pinpointing of the entry and exit levels as accurate
and profitable as possible.
One of the widely used Fibonacci ratios is the 0.382 ratio.
As it can be easily seen on any forex chart, currency prices are
continually changing and they follow an oscillatory pattern with peaks
and valleys. The limit of the peak is usually called a resistance level
while the valley is usually called a support.
In order to find the 0.382 ratio level what you do is, first;
measure the size of the drop or rise over your time of interest. Once
you have that value you multiply this by 0.382. Now depending on what
you are looking at, a rise or a drop on the price of the particular
"currency pair" you are trading, you will add the last value you
calculated to the total drop or subtract the value from the total rise.
These operations will give you the 0.382 Fibonacci ratio
level, either for a rise or a drop on the chart you are analyzing. Once
you have the value you can then start planning the strategy you will
follow in order to make a high probability profit from this valuable
information. For the 0.382 ratio level calculated for a recent rise in
the "currency pair" exchange price, your calculated level will be a
highly probable support and for the case of a level calculated for a
recent drop of the prices your level will be a highly probable
Knowing this ahead of the market and having the proper
secondary indicators, will give you a huge advantage over most forex
traders, and that's something any trader would like they could count
on. That's why Fibonacci trading is so widely accepted over the world,
and of course, why it's so profitable and successful.
Free chapters of a forex day trading system can be downloaded
at http://www.1-forex.com in case you are interested in learning more
about Fibonacci forex trading.
by Adrian Pablo