Forex market traders use different strategies to win the trading game. When a forex trader understands the strategies that lead him to win in the forex market then he keeps going up the ladder in the forex market trading.
The people who might have made it through trading forex might have played their cards right, they might have risked the right way and strategized right as well. There are also various reasons why one might have joined forex trading. Some people do it for fun and not solely to earn a living. Others get into it professionally, having in their mind that is where their bread and butter comes from.
How to use Fibonacci Retracement in Forex Trading
There are steps that a forex market trader puts in when using Fibonacci Retracement in Forex trading was introduced by Leonardo Fibonacci who a mathematician, an Italian one to be specific, and hails from Pisa. Fibonacci retracements are used by forex market strategies to calculate resistance and support levels.
Fibonacci Retracements are used by different forex market traders to identify the direction of the downward trend in the market, to monitor the three potential resistance levels: 0.236, 0.382, and 0.618, and to attach the Fibonacci retracement tool on the top and to the bottom.
What To know About Fibonacci Retracements in Forex Trading?
Fibonacci Retracement has levels when used in forex trading. These levels indicate when the market prices could change direction and also detect the possible resistance and support levels. The Fibonacci Retracement is horizontal lines that function the best when there are trends in the market.
When the market is upwardly trending, then a forex market trader should buy and when trending downward the forex market trader should sell. When the forex trader buys, they go long and when they sell, they go short on a retracement.
The Fibonacci retracement levels act as a technical indicator prediction as they predict where the market price will be in the future. The trick about being in the forex market trading that it is all about numbers, how the process fluctuates, and the prediction of the prices in the future as well as how it was in the past.
If the price starts on a new trend, the prices retrace or return to history. This means that they revert to the previous price levels before trending in the new direction.
How to Find Fibonacci Retracement Levels?
To find the Fibonacci Retracement levels, one has to find the current market prices normally referred to as Swing Highs and Swing Lows at this particular point. One has to also look at the trends in the markets both for uptrends and downtrends. Since this all found out online and mostly on a computer, one has to click on the Swing High for the downtrends, dragging the cursor down to the most current Swing Low, and then do the same on the Swing Low for the Uptrends, dragging it down to the current Swing High.
A forex market trader should however note that Fibonacci Retracement tools are not simple to go about. If that was the case then forex market traders would be doing their orders on the Fibonacci retracement tools day in day out for the market prices to trade 24/7.
It is therefore important for a forex market trader to learn how the Fibonacci retracement levels and tools are used especially when deciding on the forex market trading strategy to use and apply in the trading game.
This article looked into three steps that a forex market looks into when using Fibonacci Retracement in forex trading. The three steps are to identify the direction of the downward trend in the market, to monitor the three potential resistance levels:0.236, 0.382 and 0.618, and last but not least to attach the Fibonacci retracement tool; on the top and to the bottom.
There were highlights of how Fibonacci retracement levels are used in this article, what to know about them also how to find them. It is therefore of utmost importance that a forex trader learns all about the Fibonacci retracement and how they are used in forex trading strategies. This is especially key to make your work easier in knowing what strategy to use and apply while in the trading game.