I understand what they are and the patterns involved but I dont understand a single part of it applied to forex. Does anyone have a good source that explains it very thoroughly but simply or can just explain it well themselves?
The basic of using fibonacci in trading is to use the different ratio levels as possible stop, reversal or continuation spots.
Take a look here: Fibonacci Trading in Forex
And remember, it takes a little practice to get it right.
can some one please please explain for me what does that mean and how can we use it ?
It’s like predicting where the next reisistance or support will appear based on statics of previous behaviour of the price movement of the market, and generally if price went on those reisistance or support line, there’s a big possibility that it may bounce or keep going through. Let’s say for example you found an uptrending pattern and saw from the top tip of it that the price now is going back down, you use the fib to see up to where it might bounce back up again… If it was uptrending at first, the down movement maybe just a retracement or temporary and it may go up again. Some says (based on statistics) if it is just a retracement you have to watch out between 38.2 up to 61.8, because that’s where it might happen, so you look up the previous support and resistance between that two levels because that where it might bounce and go back up again… if it is indeed only a retracement. But there’s more to it.
The pattern stuff, fib, overbought, oversold, indicators, etc, somehow it was based on study on behaviour of human beings… (that’s us)… that we keep doing all stuff, decisions, etc etc the same thing over and over again. Ex. If all people in one country got jobs, that means more people can buy a lot, if that happen that affects supply and demands, and when supply and demand is affected, value of currency is affected, and market price acts on it. Overtime studies shows that somehow there’s a pattern that happens same thing again and again, not exactly the same but somehow acts like the same thing before. Like for example, you ask this question, and someone replied to it and explained to you, after some time in the future there will be another gonna ask the same question, and what will happen then… yup you predicted it right, someone will answer it… if just in case no one on that time will… then you predicted it wrong… then you have loss…
If you don’t understand it, move on and trade something you do understand.
Don’t try to force your trading around a concept you don’t fully understand, its a recipe for financial ruin
“You can search for some online videos from the internet. There are good vidoes you can watch”
Fibonacci is an indicator that is commonly used by forex traders to know where and when market reverses or keep moving. The Fibonacci levels acts as a support and resistance that can be used for a prediction of price movement. When the price goes up they act as resistance level and vice versa. In order to draw the levels you have to wait for the trend to mature. You can incorporate Fibonacci to define your entry and exit strategy. It is a forex trading tool I enjoy using together with other indicators. For installation of the Fibonacci channel on the diagram, you should select the “insertion” - “channels” menu item - “Fibonachi”
Advantage of this channel that it not only shows trend boundaries, but at the same time shows different nodal levels. Having set only two lines, you will receive 4 additional lines of support resistance which can be used for a prediction of movement of the price. You need to know how to identify the BUY/SELL signal.
This Video “[B]HOW TO USE THE FIBONACCI CHANNEL[/B]” will help you as it gives clear direction of this channel that it not only shows trend boundaries, but at the same time shows different nodal levels. As we can see, having set only two lines, we will receive 4 additional lines of support resistance which can be used for a prediction movement of the price.
Although the conventional Fibonacci retracement levels are 38.2, 50 and 61.8, there are other levels which when incorporated into the tool, work wonder. Square root of 0.618 gives 0.778 and square rooting that result in turn gives 0.887. This two levels are invaluable not only if one intends to trade Harmonic Patterns but in any price formation which warrants Fibonacci retracement tool. As oppose to using a single Fibonacci tool to decipher where a retracement will end, I often use two Fibonacci tools i…e could be retracement tool with expansion tool or extension or retracement tool with retracement tool. This affords me the room to set a really tight Stop Loss as oppose to using one Fibonacci retracement tool which in most cases requires one to set a stop below 0.618 fib level which often times means setting a wide Stop Loss.