Fibonacci levels are based on a concept come across commonly in mathematics. A tremendous discovery made in the 12th century lives to power several Forex trading approaches today, in the 21st century! These levels are employed predominantly in technical analysis, to better understand price movements and have a clearer view of the markets. Fibonacci indicators aid in technical analysis by helping spot the support/resistance points on a chart.
Drawing a trendline between the high and low and dividing the vertical distance by the ratios of 23.6%, 38.2%, 50%, 61.8% and 100%, we get Fibonacci levels.
Fibonacci indicators are traditionally placed near points where price movements are observed, which in turn will give rise to new support/resistance levels. Technical traders employ this indicator while Forex trading to find out the best entry/exit points and stop-loss placement points. Unlike several other indicators, the Fibonacci levels are static, meaning they don't move with market movements. While many may think this is disadvantageous, it is quite the opposite!
The stationary nature allows traders to study price movements immediately and act upon the same in an efficient manner, thereby making for a fine addition to a strong Forex trading strategy.
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| Tips to Use Fibonacci Forex Trading Strategies 2019 |
Types of Fibonacci Levels:
1) Lines: The simplest of Fibonacci trading strategies, these lines are formed on the chart to look like a grid. By employing the Fibonacci ratio, the distance between these lines is calculated and employed for analysis. Depending on the movement of a trend, you can place stop-loss and take profit orders at specific points where you feel reversals may occur.
2) Time Zones: Unlike other Fibonacci tools used while Forex trading in Pakistan, the time zones allow you to speculate on the coming trends on the charts; this is done based on the previous momentum readings. Since this momentum varies from one currency to the other, and across multiple timeframes, it is seldom employed.
3) Fibonacci Channels: To be put simply, these are an inclined version of the Fibonacci lines discussed above. Similar to lines, you can build grids and speculate price movements for a particular currency seamlessly.
4) Arcs: Stretched across the boundaries of a trend, arcs are best-used when the price movements are relatively flat. You can catch trend retracements by building arcs from one point of a trend to the other.
5) Fibonacci Fan: Like rays of light scattering from a point of origin across a radius, the fan is a tremendously dynamic Fibonacci tool. An uptrend is indicated by a fan being located under the price chart, and the opposite of this signals a downtrend.
6) Extensions: Based on trend waves and retracement waves, Fibonacci extensions point towards the next possible benchmark in a trend and works incredibly with a take-profit order.
Trading with Fibonacci Levels:
These levels can be used solo or in combination with other indicators. To employ them while Forex trading in Pakistan, you can set a pending order at a level 100 breakout after a retracement. By expanding the trend from the end point to the start, you get a detailed Fibonacci grid.
Pros and Cons of Using Fibonacci Levels:
Pros:
- What makes the Fibonacci level an impeccable indicator is its versatile nature. This decade-old theory is applicable to a variety of trades, through different Forex trading strategies, across varying timeframes and even in different trade markets!
- From finding exits to placing entries, you can employ Fibonacci levels across a number of different implementations.
- The static nature of Fibonacci trading strategies enables traders to pin-point the points of price changes accurately and accordingly take action.
Cons:
- To employ Fibonacci doesn't have any specific prerequisite; however a lot of manual work, like placing reference points, has to be done by traders prior to using Fibonacci levels.
- Several other indicators, however, start working automatically when added.
- Additionally, to employ Fibonacci trading strategies requires an adept understanding of Forex markets, something several beginners might lack initially.
To get started with Forex trading in Pakistan, you will need a firm grip over how currency markets work. Right from basic entries and exits, all the way up to stop placement - learn the best techniques from WesternFX! The Pakistan currency markets reward only the sharp players, and with our expert guidance you can become on in no time. Call us today and get to know more!
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