By Stephen Todd

In this report, we will look at the history and background of Fibonacci and The Golden ratio. We will then outline three specific money management tips that can help to increase your potential for profit.

Support and resistance levels is an important consideration for most retailers to identify entry and exit points when trading. Fibonacci retracement “percentage” levels based on Fibonacci number sequence and the golden ratio is very popular with many resellers, but what are they exactly?

What are Fibonacci and the Golden Ratio?The Fibonacci sequence appeared first as the solution to a problem in the Liber Abaci, a book written by Leonardo Fibonacci in 1202 to introduce the Arab numerals used today for a Europe still using Roman numerals. The original problem in Liber Abaci asked the question: how many pairs of rabbits can be generated from a single pair, if every month each mature couple brings forward a new pair, as from the second month, you will be productive. The Golden RatioAfter the first pair of numbers in the Fibonacci sequence, the relationship between a random number to the next higher number is around.618, and the lower number is 1618. these two numbers is the golden mean, or the golden ratio. Its proportions are pleasing to the human senses and it appears everywhere in biology, art, music and architecture.A few examples of natural shapes based on the golden ratio includes DNA molecules, sunflowers, snail shells, galaxies and hurricanes.

Important Retracement levels

The two Fibonacci retracement levels considered percentage is the most important in the trade is 38.2% and 62.8%. other major retracement percentages include 75%, 50% and 33%; Three profit tips for using Fibonacci Numbers1. Fibonacci defines Stop Loss LevelsA operators can use Fibonacci numbers provided for stop loss orders.

For example, if at least three Fibonacci price levels are assembled in a relatively tight zone, a stop loss position just below or above the zone is set.

Fibonacci number helps define stops in the following way, if a trader building trades workers against a support zone, if the zone support is broken and the price building trades workers in this zone, the cause of the trade is blurred and attitude should be closed.

Set tab stops using Fibonacci retracements takes feelings of trade and provide a pre defined exit point.

2. Fibonacci defines the position size

Fibonacci numbers, depending on the risk you are prepared to take per trade, also define the position size. If prices are right on a certain level, can you for example want to have more positions than if a price is further away.

3. Fibonacci defines goals

With Fibonacci numbers, when a pattern is completed against a Fibonacci price zone, you can use them to set profit goals to bank partially surplus or tight stop loss levels. This clear targets for operators who helps them to lock in profits; the great advantage of Fibonacci and the golden ratio is that they have feelings of trade and can define not only the stop loss to exit a market, but also set profit objectives, together.

W D Gann and Fibonacci-The Perfect Trading combination!

A trader who incorporated Fibonacci and The Golden ratio in his trade was the legendary trader W D Gann. We believe that the use of Fibonacci numbers, Gann trade method gives traders with the best possible combination to seek long term trade surplus.

Visit our site to learn how to increase your FOREX profits using Gann-methods: http://www.gann.co.uk

Article Source: http://ezinearticles.com/?expert=stephen_todd

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