Fibonacci trading: what is it and how does it work? An explanation of this tricky trading strategy for many people, read more about it here!
Fibonacci trading is a rather complicated strategy. However, it is also a very popular strategy as it is one of the most widely used technical indicators. You use the Fibonacci range to make decisions while investing. This series was developed by Leonardo Fibonacci and allows you to recognize pivots or reversals in the market. Moreover, this strategy can be used to identify entry or exit moments. If you want to know more about this information in Colombia or Spanish countries, read the following article with información sobre los mejores brokers de Colombia
- The Fibonacci series was developed by Leonardo Fibonacci in the 13th century, on the occasion of a mathematics tournament in Pisa. The Fibonacci series of numbers, starting with 0 and 1, is made by adding the previous two numbers. The series of Fibonacci looks like this:
- The Fibonacci series is important because of its “golden section” of 1.618 or its inverted 0.618. In the Fibonacci sequence, each given number is about 1.618 times the previous number and 0.618 times the next number (except for the first few numbers). Fibonacci discovered that these ratios kept coming back into the universe or nature. For example, the distance from the ground to your navel is 61.8% of your total length. In addition, this ratio was observed in the Parthenon, the Mona Lisa, tree branches and even galaxies.
Why to use the Fibonacci range when investing?
Financial markets never move up or down in a straight line. The price always shows cyclical movements. The movements in line with the price trend are called impulsive movements, but reversals also take place. These reversals are called retracements. When the price becomes temporarily cheaper, we speak of an uptrend. If the price temporarily increases, we speak of a downtrend.
These reversals can be predicted using the Fibonacci series
For example, the row of Fibonacci can be subdivided into ratios that give indications of where a particular financial market will go. Fibonacci trading techniques can also be used to predict the length of these cycles. So if you want to invest in financial products using Fibonacci, you can, as it were, predict the reversals in the market. Using the Fibonacci series, you can also identify the support and resistance lines. In addition, you can use the Fibonacci sequence to determine your entry or exit moment. This strategy can be applied to all financial products: equities, forex, cryptocurrencies, commodities, etc. For more information on determining your exit point, please refer to our comprehensive exit strategy guide on this website.