Fibbonachi – Basics

Fibonacci Expansions and Extensions can be great leading indicator of price targets once a Retracement level is honored. Deciding which tool to use is a personal choice for price targets as both methods have their benefits. Because this tool is taking you into new price territory, trailing stops are recommended along with the proper trade size so that your risk is always contained. Fibonacci numbers or ratios are mathematically significant numbers that occur throughout nature and often in financial markets. They were discovered by Leonardo de Pisa in the 13th century and he was known as the most talented Mathematician in the middle ages. The most important number or ratio is the 61.8% or .618 levels. There is also a 1.618 Extension along with 2.618. In Forex trading, Fibonacci retracements can identify potential support / resistance levels. The most commonly used Fibonacci levels are the 38.2%, 50%, 61.8% and sometimes 23.6% and 76.4%. In a strong trend, which we always want to be trading, a minimum retracement is around 38.2%; while in a weaker trend, the retracements can be 61.8% or even 76.4%. A complete retracement or break of 100% of the prior move would nullify the current move. There are 3 ways that Fibinacci is commonly used either for Target Expansions, Retracements or for trend trading. At 240Code we go beyond the common mythology and use Fibonacci in order to expose the dealers and market makers cluster of target stop objectives.

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