By: Peter Lim
There have been so many approaches to trading forex especially in the technical analysis field, that many times the newbie to forex trading will be dumbstruck with the various trading techniques and strategies. From the very simple but effective price trading action method to the sophisticated methods of neural network price projections and the estoric methods of astrology and moon readings, forex traders, whether newbies or veteran traders can choose from a vast arsenal of trading tools to assist them in trading profitably.
The Quick Fibonacci Trading Method
One simple way to trade is to use fibonacci price levels and retracements.
As the price of a trading instrument increases, it will move from a low point A to a high point B, where B forms a temporary top. At point B, prices will then fall off and retrace. Statistics have shown that prices will want to fall off to fibonacci levels of 25%, 38.2%, 50% or 61.8% where it can get support to stage a rebound. The reverse is true when prices fall from a point A to a point B. Simple as it sounds, these observations can be used accurately to trade the forex, and has evolved into what we call fibonacci trading, some calling it "quick fib" trading.
The difference between trading forex and other capital instruments such as futures and commodities and stocks and shares becomes apparent when we use this method of trading. Firstly, when we trade forex, we do not have the opportunity to know the quantum of volume being traded at that instant, and so all we can do in forex analysis is to decipher the price movements. This makes the fibonacci trading method a price action trading method. In contrast, when we trade stocks and shares or commodities, we correlate trading volume to price outbreaks. When we have a price outbreak, and that is accompanied by heavy volume, we attach a higher level of confidence that the outbreak is genuine.
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The Quick Fibonacci Trading Method
One simple way to trade is to use fibonacci price levels and retracements.
As the price of a trading instrument increases, it will move from a low point A to a high point B, where B forms a temporary top. At point B, prices will then fall off and retrace. Statistics have shown that prices will want to fall off to fibonacci levels of 25%, 38.2%, 50% or 61.8% where it can get support to stage a rebound. The reverse is true when prices fall from a point A to a point B. Simple as it sounds, these observations can be used accurately to trade the forex, and has evolved into what we call fibonacci trading, some calling it "quick fib" trading.
The difference between trading forex and other capital instruments such as futures and commodities and stocks and shares becomes apparent when we use this method of trading. Firstly, when we trade forex, we do not have the opportunity to know the quantum of volume being traded at that instant, and so all we can do in forex analysis is to decipher the price movements. This makes the fibonacci trading method a price action trading method. In contrast, when we trade stocks and shares or commodities, we correlate trading volume to price outbreaks. When we have a price outbreak, and that is accompanied by heavy volume, we attach a higher level of confidence that the outbreak is genuine.
[Read full article]
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