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2010-01-12, 15:06:18 return
How to Use Fibonacci Level in Your Trading


So who was Leonardo Fibonacci? He was a mathematician who lived in the thirteenth century in Italy. He was the first to discover a certain ratio of number series that can describe natural proportions of things in the universe, including price data. His ratio arise from this number series: 1,2,3,5,8,13,21,34,55,89...

His series of numbers starts with 1, followed by 2. The third term will be 1+2, the forth 2+3, and so on. If you try to divide any number from this series, after 3, by the next higher number you will obtain 0,625. After 89 it will become 0,618. These ratios are are called the "golden mean". From this ratios someone created Price Retracement Level (0.236, 0.382, 0.500, 0.618) and Price Extension Model (0, 0.382, 0.618, 1.000, 1.382).

1. Fibonacci retracement level
If you face an uptrend market you should go long on a Fibonacci support level. We will have this expectation because many traders all over the world are watching these levels. They are buying and selling at these levels which becomes a self-fulfilling expectation.

2. Fibonacci price extension levels
If the market is faces an uptrend you must take profits on a long trade at Fibonacci price extension resistance level. This can be applied to price bar chart of any market.

Fibonacci levels will not make you rich alone but they can be a useful part of an effective trading method that contain other analysis and techniques.
Fibonacci levels can be very helpful, but you should never enter or exit a trade based only on Fibonacci levels alone.
Good trading!
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