The great thirteenth century mathematician Fibonacci was important to history for devising a number of different equations and getting a closer review of how numbers work. Today his work continues to be reflective in forex trading through the use of Fibonacci levels.

Fibonacci levels are used to identify the support and resistance sports on a trend. These can particularly identify when values and trends can be impacted over time. This can help you get an easier time with understanding how different values are going around on the market and can certainly be important for when you’re trying to figure out how the values of something might change.

These are typically calculated within a to help you learn how different trends are moving around. If you don’t have time to learn that, you might have better luck joining one of the social trading networks. Don’t know where to start? Check out this Tradeo review. Otherwise – keep on reading and find out what Fibonacci levels are all about.

How Are They Created?

Fibonacci levels are generated within typical trading platforms and will help you identify trends between two extremes or a high and low on a chart.

1. The top and bottom parts of a chart’s readout will be measured.
2. Individual trend lines are arranged on the chart. These are horizontal lines organized at specific percentage points.
3. Trend lines are arranged at the 23.6%, 38.2%, 50% and 61.8% rates. These are Fibonacci ratios that are often used to divide general movement rates.

This in turn helps you to create good ideas for where target prices or stop losses may be placed at.

This is a good example of how these work. Notice how the levels are organized from top to bottom in a clear pattern. It helps to review how well the values in a currency pair are changing and how different trends in the buy and sell patterns might come about. The specific picture here shows that one of the lines actually held and that the trend within a currency pair is actually active and consistent.

You can use these lines to particularly determine when you should be buying or selling a pair as you can get a clear idea of what might come about over time in that particular pair.

Finding Levels

You have to use a few pointers when finding levels that you can easily use:

1. You must look at the most recent highs and lows of a swing.
2. Check on the data that goes in between each of the highs and lows that you come across. This is regardless of whether this goes from up or down or the other way around.
3. Check on the retracement or extension levels within the trend. A trading program can help you figure this out.
4. Look at how well the Fibonacci levels you run into hold. This can be a sign of a trend being steady even if there is a slight reversal.

The important point is that the Fibonacci levels cannot just be broken into rather quickly. You have to take a careful look at these bars to see if a reversal is going to correct itself over time. The use of Fibonacci levels can really make a difference when figuring out what you can earn.

About Nick James

Nick has been trading currencies and CFDs since 2009. Currently he focuses on fundamental analysis and positional trading. In free from trading time Nick works on various FX sites to help the trades open better positions and get a detailed overview of the FX market.