Practical application of Fibonacci Trading The intention of Fibonacci Trading is to find some order in the complex movement of price charts. The geometry of past price action is used to project future support and resistance levels. These levels are then used to determine trading activity, to enter or exit the market, or to place stop-losses at those levels. Neal Hughes “FibMaster” is a respected trader who has mastered these techniques. Many thousands of traders employ his methods every day, trading just about every financial instrument available.

The mathematics of Fibonacci is not a new discovery. The Italian Mathematician nicknamed “Fibonacci”, outlined a remarkable series of numbers in the 12th century. His “Fibonacci Sequence” of numbers all relate to each other by the ratio of 1.618 or it’s inverse .618 . This proportion is known by several names, Phi, “divine proportion”, “golden mean”, and “golden ratio”. While these mathematical relationships are commonly found in nature, our concern is with their application to trading the financial markets.

Fibonacci Trading – Forex, Stocks, Futures, Indexes Technical analysts use these ratios in Fibonacci trading. The basic ratios applied to charts are 38.2%, 50%, and 61.8%. Often, more ratios can be applied, for example 23.6%, 161.8%, 423%, and even more. In addition, these ratios are used in multiple varieties, the most common being: retracements, extensions, expansions, arcs, fans, and also time zones.

Support and Resistance, key to Fibonacci Charts

Technical analysts use these ratios in Fibonacci trading. The basic ratios applied to charts are 38.2%, 50%, and 61.8%. Often, more ratios can be applied, for example 23.6%, 161.8%, 423%, and even more. In addition, these ratios are used in multiple varieties, the most common being: retracements, extensions, expansions, arcs, fans, and also time zones.

A major component of technical analysis is the application of support and resistance. These levels are applied to determine entry and exit points with the intention of trading the markets for profit. Some of the best traders use Fibonacci percentages, expansion and retracement levels.

As any trader knows, a chart never moves in the same direction for a long time. Charts often pull back (retrace) a certain amount before turning back in the original direction. These retracements often occur at Fibonacci levels – 38.2%, 50%, and 61.8%, and some of the other popular levels (50%, .79% etc).

At first, the study of Fibonacci appears very complex, with all the percentages and myriad of lines that can be placed on trading charts. Using FibMaster’s methods, traders can learn some advanced rules to simplify the process and bring clarity to their charts. Instead of the many insignificant lines, his techniques train the trader to focus only on the strongest Fibonacci levels that are more likely to have a bearing on the markets. Using these strategies, traders attempt to predict the most likely reversal points in the markets.

Fibonacci Trading, additional resources;

Wikipedia Reference – Fibonacci
Free Fibonacci Trading Videos
Trading Charts

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