Back to history

 Welcome back to daily blogs with ValidUS!!!! We are back with another knowledgeable blog to enhance your learning experience with ValidUS. In this blog, we will take a leap back to history the beginning of trading sequences. We hope you enjoy this blog. 

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Today's lesson is about Fibonacci. So let's start with Fibonacci, or his real name was Leonardo Bonacci. He was an Italian mathematician famous for discovering the Fibonacci sequence. Every number in the sequence is simply the sum of the two previous numbers. Hence, one plus one equals two, one plus two equals three, two plus three equals five and so on. The sequence can then be broken down into ratios that some believe provide clues where the given financial market will move to the sequence itself. It's not that important it's the ratio of these numbers that matters. If you measure the ratio of any number to the succeeding higher number, you will get 0.618. Suppose you calculate the ratio between any second number. In that case, you will get the ratio 0.382 Fibonacci sequences is significant because of the so-called golden ratio of 1.618 or its inverse 0.618. In the Fibonacci sequence, any given number is approximately 1.

       618 times the preceding number ignores the first few numbers, each number is also 0.618 of the number to the right of it again ignoring the first few numbers in the sequence the golden ratio is found in nature. Where it describes everything from the number of veins in the leaf to the magnetic resonance of spins in cobalt now but nine by crystals, this information is given to you because you may have guessed the same ratio to work in the forex market traders. Use the Fibonacci ratios to find the potential reversal points in the market as the price tends to find support and resistance at these levels. The five key Fibonacci ratios are 23.6 38.2 50 61.8, and 100 [Music], so Fibonacci numbers don't have any specific formula. Rather it's a sequence where the numbers tend to have specific relationships with each other.

How to calculate Fibonacci retracement levels?

The Fibonacci number sequence can be used in different ways to get Fibonacci retracement levels or Fibonacci extension levels. So here's how to find them Fibonacci retracements require two price points to be chosen on the chart, usually a swing low and a swing high once those two points are chosen, the Fibonacci numbers or lines are drawn at the percentage. As percentages of that move, if a price rises from fifteen dollars to twenty dollars, then the twenty-three point six per cent level is 18.

82 dollars, or it's calculated from 20 dollars you extract five dollars which is the difference between 15 and 20 dollars multiplied by 0.2236, which equals 18.82. The 50 level is 17.50 or 15 minus 5 dollars multiplied by 0.5, which equals 17, so basically, Fibonacci extension levels are also derived from the number sequence as the sequence gets going; you need to divide one number by the last number to get a ratio of 1.

618 divide a number by two places to the left, and the ratio will be 2.618. Suppose you divide a number by 3 to the left. In that case, the ratio will be 4.236. Fibonacci extension requires three price points on the chart the start of the move, the end of a move and then a point somewhere in between, equal to a full back. If the price rises, for example, from 30 dollars to 40 dollars and these two price levels are point one and point two, then the sixty-one point eight per cent will be sixteen dollars and eighteen cents it is one calculated when you multiply 10 dollars difference between 30 and 40 dollars. Then multiply it with 1.618, which will be above the price chosen for 0.3 because it is an extension of point 3 is 35 the 161.8 extension levels will be 51 and 18 cents. It is 35 plus 16.18 100, and 200 per cent levels are not official Fibonacci levels. Still, they are helpful since they project a similar move to what just happened from the price chart.

What do Fibonacci numbers and lines tell you?

Some traders believe that Fibonacci numbers play an important role in finance as we've discussed, the Fibonacci number sequence can be used to create ratios of percentages that traders use. These include 23.6, 38.2,15, 61.8,78.6, 100 and then 161.8, 261.8, 423 points. You will learn by default these numbers once you start trading daily the percentages are applied using many different techniques.

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