.: Fibonacci Numbers and the Golden Ratio 3 Tips for Greater Trading Profits
By:Stephen Todd
Category:Home / Finance / Currency Trading
In this report, we will look at the history and background of Fibonacci numbers and The Golden Ratio. We will then outline three specific money management tips that can help increase your profit potential.
Support and resistance levels are an important consideration for most traders to help identify entry and exit points when trading. Fibonacci percentage "retracement" levels based upon the Fibonacci number sequence and golden ratio are very popular with many traders but what are they exactly?
What are Fibonacci Numbers and the Golden Ratio?
The Fibonacci sequence first appeared as the solution to a problem in the Liber Abaci, a book written by Leonardo Fibonacci in 1202 to introduce the Hindu-Arabic numerals used today to a Europe still using Roman numerals.
The original problem in the Liber Abaci posed the question: How many pairs of rabbits can be generated from a single pair, if each month each mature pair brings forth a new pair, which, from the second month, becomes productive.
The Golden Ratio
After the first few numbers in the Fibonacci sequence, the ratio of any number to the next higher number is approximately .618, and the lower number is 1.618. These two figures are the golden mean or the golden ratio.
Its proportions are pleasing to the human senses and it appears throughout biology, art, music, and architecture. A few examples of natural shapes based on the Golden Ratio include DNA molecules, sunflowers, snail shells, galaxies, and hurricanes.
Important Retracement Levels
The two Fibonacci percentage retracement levels considered the most important in trading are 38.2% and 62.8%. Other important retracement percentages include 75%, 50%, and 33%. Three Profit Tips for Using Fibonacci Numbers
1. Fibonacci Defines Stop Loss Levels
A trader can use Fibonacci numbers to set stop loss orders.
For instance, if at least three Fibonacci price levels come together in a relatively tight zone, a stop loss placement just below or above the zone may be set.
A Fibonacci number helps define stops in the following way, if a trader trades against a support zone, if the support zone is violated and the price trades below that zone, the reason for the trade is negated and the position should be closed.
Setting stops using Fibonacci retracements takes the emotion out of trading and gives a pre defined exit point.
2. Fibonacci Defines Position Size
Depending on the risk you are prepared to take per trade, Fibonacci numbers can also define position size. For instance, if prices are right on a specific level, you may wish to have more positions than if the price is further away.
3. Fibonacci Defines Objectives
With Fibonacci numbers, once a pattern completes against a Fibonacci price zone you can use them to set profit objectives to bank partial profits or tighten stop loss levels. This clear objective for traders helps them to lock in profits. The great advantage of Fibonacci numbers and the golden ratio is the fact that they take the emotion out of trading and can define not only stop losses to exit a market, but also set profit objectives as well.
W D Gann and Fibonacci - The Perfect Trading Combination!
One trader who incorporated Fibonacci numbers and The Golden Ratio into his trading was the legendary trader W D Gann. We feel that the use of Fibonacci numbers with the Gann trading method provides traders with the best possible combination to seek long term trading profits.
Article keywords: gann, FOREX, charting, finance, investments, pensions, trading, financial trading, financial trading
Article Source: http://www.articles32.com
To learn how to increase your FOREX profits using Gann methods please visit our web site: http://www.gann.co.uk
.: New Currency Trading Articles
1). A Closer Look At Some Of The Investment Myths In The Foreign Exchange Markets
Just like anything else there is a learning curve plus there is a lot of research and strategy that goes on behind the scenes to make a trade successful. I have written this article to help you avoid some of the more common investment myths so you will know what to realistically expect when you begin trading.
2). How To Avoid Some Common Forex Scams
There is an old saying that states, "A Fool and his Money are Easily Parted". With the proper strategy and resources from which to educate yourself, there is no reason to be foolish.
3). How To Choose The Correct Forex Trading Software For You
Just like with stock trading, there are a large number of software programs you can use to make your foray into the foreign currency exchange markets. You will find that you have two basic choices, either web based or desktop based programs.
4). Pattern Recognition And Why You Need To Learn It To Be Successful In Forex Trading
Pattern recognition is a method that will help you to be a much more successful trader. Just as with regular stock trading, the foreign currency exchange markets will very often repeat certain patterns over time.
5). How To Keep From Losing When Trading In The Forex Markets
Just as with any investment, the entire goal of investing in the foreign currency exchange market is to make a profit. The thing you must always remember though, is that just like with any other market investment, you can also lose. The reason that savings accounts and insurance policies pay such low rates of interest is because of the lack of risk.
6). Earn Unlimited Money Trading in Global Forex
What is needed to make huge amounts of money in the FX-market each day? How can you do the same ? We are giving you a head start.
7). The FOREX Market Is A Goldmine
Learn about the FOREX market, where trillions of dollars are inconspicuously made and lost every single day
.: Top Currency Trading Articles
1). Electronic Currency Exchange: Trading Digots for a profitable living
First of all, if you're just finding out about electronic currency exchange trading, then probably you're still asking "what in the world does this electronic currency business is", and most importantly, "how do I make money from it?"
Well, you are reading this at the right time, because electronic currency exchange is a business that is expanding and offering new ways to profit from it.
2). Fibonacci Numbers and the Golden Ratio 3 Tips for Greater Trading Profits
Support and resistance levels are an important consideration for most traders to help identify entry and exit points when trading. Fibonacci percentage "retracement" levels based upon the Fibonacci number sequence and golden ratio are very popular with many traders but what are they exactly?
3). How To Spot Forex Fraud
As the popularity of Forex increases so do the number of scam artists attempting to cash in on the Forex gravy train. Since Forex involves trading money internationally, often over the Internet, a whole new breed of scams have come about. Ironically many of these scam artists are finding their marks through newspaper, television or other print media advertisements.
4). Mechanical Trading systems Spotting the Ones That Make Money!
Mechanical trading systems are, as you would expect, systems that make trading decisions for you. The thought of having mechanical trading systems you can simply use to generate automatic profits, is obviously very attractive to many traders.
5). A Profitable Forex Strategy
Copyright 2006 Timothy Rohrer
Making money in the forex market is not an easy task by any means. However, given a bit of education and knowledge of the market, it can become quite easy to profit in the forex market. Most traders end up learning that its the simply systems that create the wealth. Over analyzing and over thinking can sometimes affect your trading methods and strategy.
6). Hot Tips for Successful Online Forex Trading - Part 2
In the first article in this series, I passed on several tips to help you become a successful trader.
7). The Function of Money and its Future
Originally exchange took place without the use of money, by barter. Long before money had come into the commercial world people exchanged goods for goods. This system of barter made it possible to satisfy many wants that would otherwise have gone unsatisfied. Barter raised the standard of living, but under such a system the exchange of goods was greatly hampered.