Sunday, January 27, 2008

Fibonacci application and strategy for trader

If there was a potion by which one can mysteriously earn millions or win a lottery, then every single person on earth would be after it. But unfortunately, we have nothing but our own brains and thinking abilities to rely on. There have been a few mathematicians and research scholars in the past who have calculated and figured out sequences that are used today to predict the flow of some markets and certain commodities. One such series is the Fibonacci application, which is used widely in foreign exchange trading. If one understands the sequence they can figure out the next high that will occur in the market and is a clear indicator of which direction the market is going to go in. For beginners and experienced traders, this sequence is very helpful in leading them to the right currency pairs and helping them make investment decisions. The highest and lowest numbers in the series are used to compute the Fibonacci retracement zones, which then serve as neck lines for the market.

The Fibonacci application is an indicator and strategy for the trader to predict the movement of the market and go with the trend. They will use the numbers in the series that are in fact present all around us, and some we use unknowingly in our daily lives as well. But while dealing in foreign currency we make specific use of these to help us tide over the sudden shifts that could occur in the market. They also allow the traders to make specific stop loss orders and help in earning decent profits at every investment made.

When the Fibonacci application and strategy for trader are computed it automatically reflects on what the support and resistance levels are, that will arise. This allows the trader to know when he must enter the market and when it is time for him to pull out of it. It helps them to identify the times of change and when the rates are likely to dip. For many beginners who are not familiar and well versed with the various indicators, this Fibonacci series would look like a string of numbers that just does not make any sense. But when they gain experience, they will realize that these are actually great life savers.

If a person is ready to take the necessary risks and use the Fibonacci application as a strategy, he will be able to identify the size of the position taken by the currencies he has traded in. If he wants to place a stop order close to the support and resistance levels, there is increased chance of leveraging and increasing the earnings. The Fibonacci is also a tool through which the profit objectives can be predetermined, and this is possible only in this strategy. For a person to have gains in the long run, they need to understand how the series works thereby cutting their losses and risk factor down. For more monetary success, combine the techniques of Fibonacci with that of the famous trader Gann.W.D.

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