One tool that many traders and most investors do not include in their investment or trading decisions is Fibonacci analysis. From a trading perspective, there are many basic and advanced ways that Fibonacci numbers can be beneficial to the trader. Suffice to say that this series of numbers and the relationship of one number to another in the series have been found throughout nature. The most notable relationship can be found by dividing one Fibonacci number by the next one in the series, which will give you the “Golden Ratio” of 0.618.
There are two primary ways to use Fibonacci analysis in trading. One is to identify or confirm support or resistance levels, and the other is to help identify price targets. Often times, a trader will look at a market and realize that when they were not paying attention, a significant level of support or resistance was broken, and the market has already moved significantly. Fibonacci analysis can be very helpful in this situation.
John Roman John is an active trader and educator at Investors Trading Academy with an MBA in Finance from New York University. He began trading in 1995 focusing mainly on commodities and options, then transformed into forex investment. His current specialization covers all aspects of forex trading utilizing fundamental and technical analysis, namely chart pattern analysis. Mr. Roman has conducted training seminars on all over the world from novice to innovative strategies. He provides a solid, collaborative and extremely encouraging training atmosphere to assist Forex traders in locating and trading momentum moves, using confirmed patterns and methods.