11. What are Fibonacci sequences?
Fibonacci sequences are created by summing the preceding two figures: 0, 1, 1, 2, 3, 5, 8, 13, 21, etc. When trading forex we are interested in the difference between two sets of consecutive numbers.
Your forex broker most likely has a graphics program in which you can illustrate a Fibonacci sequence. I use Videforex. The animated GIF here illustrates how I draw the graphic representing the trend that is happening.
Drawing theFibonacci rectangle
You click on Pitchfork and then the Fib Retracement. In this example you start at the wick of your highest candle and drag the rectangle to the wick of your lowest candle.
Videforex give more than just the normal Fibonacci sequence. However, I use the normal one which has three crucial retracement levels at; 38.2 percent, 50 percent and 61.8 percent.
Bear vs. bull market
We obviously have a bear market in the graphic above. In a bear market we start the graphic from the upper left-hand corner. In a bull market you start drawing the graphic in the lower left-hand corner.
Making the trade
Note that I use one minute candles. Each trade must begin just before the beginning of a new candle. The trade will last exactly 60 seconds. In this strategy, the candle time must be the same as the trade time. If for some reason I chose to use, say, 5 minute candles, I would set my trade to last exactly 5 minutes.
Before starting my trading day, I take a blank sheet of paper and write the amount in my broker’s account in the upper left-hand corner. Then I write 3% of that beside it. In this image 3% of $20.91.
Whichever strategy I’m using, I use binary options.
In a bull market, my opening price will be somewhere in the bottom 50% of the overall Fibonacci graphic. In a bear market, my opening price will be somewhere in the top 50% of the overall Fibonacci graphic.
Remember that one of the main characteristics of a good forex trader is having patience. Before starting a new trade, wait for a few retracement candles.
Note that if I’m uncomfortable with the look of the candles, I will select a different currency pair to see if I can predict more accurately with them. The only currency pairs I would consider are the ones that have a payout of at least 70%. So, in this graphic, the only ones I would consider would be the USCCNH & the NZDUSD.
Fibonacci sequences are so complicated that I highly recommend set up a demo account and watching an educator specializing in them teach live. When they make a trade, make the same trade. If you make 50 trades in a row that collectively have a success rate of at least 70%, start trading real money and see what happens. If you reduce to a success rate of less than 70%, go back to you demo account again until you figure it out.
Related Fibonacci sequences pages
An article on day trading with Fibonacci