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Why do Forex traders use Fibonacci retracements?
by MD Tanjib Forex Trading AuthorForex traders use Fibonacci retracements to figure out where to place orders for entering the market, taking profits, and putting a stop-loss order. In forex trading, Fibonacci levels are often used to find support and resistance levels and trade off of them. After a big price move up or down, these trend lines are often where the new support and resistance levels are or close to them. The "golden ratio" is used by the Fibonacci forex trading strategy to figure out when to start and end trades in all time frames.
What Are Fibonacci Retracements?
Fibonacci retracements show key levels of support and resistance. Most of the time, Fibonacci levels are calculated after a market has gone up or down a lot and seems to have stopped moving at a certain price level.
Traders plot the key Fibonacci retracement levels of 38.2%, 50%, and 61.8 % by drawing horizontal lines across a chart at those prices. This shows where the market may retrace to before going back to the overall trend that was set by the first big price move.
The 50-percent level is not part of the Fibonacci number sequence, but it is still used because it is common knowledge that a market will retrace about half of a big move before resuming its trend.
Traders' Strategies for the Forex Market That Use Fibonacci Levels:
Each trader will have a different strategy, so as an investor you should think about how each of the below strategies might fit into your overall view of the market. Not every trader uses the following options, and it's fine if none of them fit with your plan.Fibonacci retracements are used in the following strategies:
- With a stop-loss order just below the 50 percent level, you can buy near the 38.2 percent retracement level.
- With a stop-loss order just below the 61.8 percent level, you can buy near the 50 percent level.
- When you sell near the top of a big move, you can use the Fibonacci retracement levels as targets for when to take your profit.
- If the market retraces close to one of the Fibonacci levels and then resumes its previous move, you can use the higher Fibonacci levels of 161.8 percent and 261.8 percent to find possible future support and resistance levels if the market moves beyond the high/low that it reached before the retracement.
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About MD Tanjib 
Forex Trading Author
100 connections, 5 recommendations, 427 honor points.Joined APSense since, January 18th, 2021, From khulna, Bangladesh.
Created on Sep 5th 2022 00:07. Viewed 94 times.
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