Trading and the Fibonacci Numbers

Traders have been using the Fibonacci numbers ever since the Italian mathematician have discovered its application in different aspects of human endeavor such as art, architecture and trading as well. The numbers also occur in the natural things found in the environment and in the various cycles that occur naturally as well. The Fibonacci sequence is significant to those who are trading in various markets because they are able to make accurate predictions about the patterns and trends of the market prices. Most successful individuals in the trading business have learned how to make use of the series of numbers together with other elements such as time and price.

Traders determine the retracement levels through the use of the Fibonacci numbers. They need to be able to see where the prices are moving towards a particular direction. They also have to be watchful as the prices get near the following levels: 0.382; 0.50; 0.618; and 0.786. Traders know that the prices may move to the opposite direction anywhere at these points before finally going back to its original trend. New traders today who may have some difficulty making calculations manually can make use of some software programs to help them. However, there is a need for them to understand the concepts of Fibonacci and how it is applied in the market that they are in

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Aside from plotting the possible retracement levels, traders also need to study the time frame on which the trends occur. They may be able to project more accurately if they can see the patterns clearly. Traders options may be able to determine where the clusters of price levels coincide with the time element before moving to the opposite direction. However, traders have to be very keen in determining the levels where they can possibly make a move in order to gain. Although the Fibonacci numbers can be used to determine possible trends, traders still have to make the right decisions at the right time.

Those who are new to future option trading have to understand a few important things when using the series of numbers in determining the retracement levels. They have to know that the Fibonacci levels may be different from each other so the market trend may revert at any point. Although traders have this tool to analyze the market, they still have to study other elements that may influence the trends aside from the price movements and the time frame. Traders especially those who are still new have at least a reliable basis when it comes to having more chances at winning in any of their trading transactions.