Fibonacci SequenceThe Fibonacci Sequence was discovered in the 12th century by Italian mathematician Leonardo Fibonacci. In this sequence, each number is the sum of the previous two. 1 (1+0) The sequence also gives that any number will be 1.618 times the previous number, and 0.618 times the next number in the sequence. Forex Traders use this sequence when determining future levels of support and resistance. This is called Fibonacci retracement. After the price of a currency has moved significantly, the price will often retrace at or near Fibonacci retracement levels. See the screenshot below:
You then draw your Fibonacci levels (I use 0.382, 0.5, 0.618, 0.786, 1.27, 1.618 and 2.618 I use Dealbooks 360 charting software, which has a Fibonacci tool, but you can also draw your Fibonacci retracements by hand. Like all Forex trading tools, this sequence cannot be used on it’s own to determine whether to get into a trade. It is but ONE tool of technical analysis.
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