Advantages of Using Fibonacci Retracements in Forex Trading

Fibonacci retracements are tools used in placing orders in forex trading. When you use the Fibonacci retracements, you increase the profits ad decrease the losses.

The success of forex trading is determined by the time the order is placed. Swift decision-making is required due to the volatility of the forex market.

What Are Fibonacci Retracements?

Fibonacci retracement is a systematic way used to identify the support and resistance levels in a trade market. The support and resistance levels are calculated where there is a huge drift in the market. During major implications, the market levels move up or down, thus stabilizing the price level.

Fibonacci retracements use the hard data that is derived directly from the market. Since Fibonacci uses ratios and not individuals, it eliminates emotional bias from traders. A forex market without emotional discrimination is stable.

 Advantages of Using Fibonacci Retracements

1. Flexibility

Forex traders can use Fibonacci trading strategies in both long-term and short-term trade markets. Forex trade markets can last e over a minute to a long-term period of several years.  Fibonacci retracements can be adjusted to suit any demand.

2. Stabilises the Market

Since Fibonacci retracement is based on ratios and not individuals, it reduces the emotional bias from traders. Emotional bias creates instability in the forex market. Fibonacci strategies stabilize the forex market, thus making it conducive for all forex traders.

3. Systematic

 Fibonacci retracement strategies are a systematic way of identifying the support and resistance levels in the trade market. Support and resistance levels are calculated during major drifts. Forex market levels must move up and down for the price level to be flat.

4. Automation

You do not need to know how to calculate the Fibonacci retracements. The system automatically calculates these ratios. All you need to do is to study the trends to decide on when to trade.

How to Utilize the Fibonacci Ratios

Fibonacci strategy is based on the argument that numbers in a series form ratios. The ratios formed by the numbers can be used to describe the natural proportions of the things available on the earth’s surface. The numbers in the series range from zero to infinite. 

The ratios are determined as follows:

1. You add two numbers that are in a series to form the third number. If you begin with zero, you add to get one. One then added to two to reach three. Adding these numbers will form a sequence of 0, 1, 2, 3, 5, 8.

2. After adding the numbers in a sequence, you then determine the last digit’s ratio over the second last digit. This ratio is 1.618, known as the golden ratio, and is found in many natural objects. The golden ratio is what is used by traders to calculate the retracement and extension levels.

3. The retracement and extension levels are known as the profit-taking levels. These are the levels that the traders use to place their orders. Fibonacci retracement levels move in one direction before retracing when the prices are high.

Advantages of Using Fibonacci Retracements

 1. Traders Are Able To Retrace the Paths

The levels will resume their normal path after a retracement. This trend allows forex traders to make decisions on when to purchase or sell their orders. The Fibonacci retracement golden ratio occurs in most natural objects. This feature makes the ratio appropriate for any natural forex market.

2. Maximising the Profits

 The Fibonacci retracement ratio allows a forex trader to have a glimpse of the market trends. Having a clear picture of the market enables the forex trader to make informed decisions. A trader can make a decision on when to sell or buy forex.

3. Easy To Use

 The golden ratios are easy to calculate and implement. You do not have to be an expert in forex trading to calculate the ratios. The ratios are automatically calculated by the system.

4. Flexibility

 The Fibonacci retracement ratio can be applied in any type of market. These ratios can be used for both short and long term forex market.

The ratios can also be used for advanced trading and beginner traders. Both experienced and amateur traders can use the Fibonacci ratios to sell or buy forex.



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