Leonardo Fibonacci was a brilliant Middle Age mathematician that introduces the Arabic numbers to the western world, in the year 1202 he made public his number sequence in which each subsequent number but the first two is the sum of the previous two numbers. The Fibonacci’s sequence has been found in each geological, natural, and astronomical formation.
What Is Fibonacci?
Fibonacci in the financial market is the short term for the Fibonacci retracement; it is an analytical tool used in trading technical analysis. It used several preset ratios obtained by dividing two consecutive Fibonacci’s numbers, either by the next lower or higher number. Afterward, the ratios are used to divide the vertical axis or the two extreme point on the price’s chart, and a vertical line is drawn on the selected ratios. Finally, the lines are used as support and resistance lines to identify a retracement or in nonprofessional terms, a temporary reversal point, or changes in the direction on a price trend.
·Fibonacci ratios are the division of two Fibonacci’s numbers into each other
·The Fibonacci ratios are used in a price’s chart to establish the support and resistance lines. Additionally, a 50% mark is added as a marker to increase sensitivity and specificity.
·The support line is the lowest price of an asset in an up trending market, which can close before a price downtrend starts or it reaches an overbought condition. (If you are no familiar with support and resistance lines, you can learn the basics in this section, you can include a hyperlink to the article)
·Resistance line is the highest price of an asset in a down trending market, which it can reach before a price uptrend starts, or it reaches an oversold condition.
·Reversal is the change in the direction of a price movement,
a.If the price was increasing, it will reverse to a lower price and starts a downtrend or decrease its value.
b. If the price was decreasing, it will reverse to a higher price and starts an uptrend or increase its value.
·The golden ratio is the 61.8; it sometimes is rounded to 62 and make a percentage of 61.8%.
·The second most used ratio is 38.2% it sometimes is rounded to 38 and make a percentage of 38%.
·The Fibonacci levels on a price’s chart, once they are obtained, are static price values, they don’t change.
Fibonacci in Use
The Fibonacci retracement is an indicator. It helps the trader to predict with certitude the future price movement or any change in the price movement direction and act accordingly to it, increasing the profits and most importantly decreasing, stopping, or preventing money loss. The ratios are transformed in percentages and used as guides for establishing the support and resistance lines. The way in which the ratios lines are drawn on the price charts creates some patterns; those patterns are easy to recognized and deliver useful market information giving an edge for the experiment trader. The two most common Fibonacci’s ratios are the gold standard reference for market reversal traders. Most brokers used a secondary indicator to confirm the Fibonacci retracement before selecting to buy a put or a call.
Setup Fibonacci with IQ Option Platform
“General Risk Warning: The financial products offered by the company carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.”
You can easly setup fibonacci on left bottom corner of IQ Option platform and select graphical tools, and than Fibonacci, please notice that you have to mark out from the highest candlestic on chart to the lowest!
“Your capital may be at risk. This material is not investment advice.”