DailyFX.com -

Talking Points

  • The Value of Fibonacci Ratios
  • Using Converging Fibonacci Levels
  • An Example of Fibonacci Confluence with AUDNZD

“The proportion of .618034 to 1 is the mathematical basis for the shape of playing cards and the Parthenon, sunflowers and snail shells, Greek vases and the spiral galaxies of outer space. The Greeks based much of their art and architecture upon this proportion. They called it "the golden mean. “

William Hoffner, Dec. 1975 Smithsonian Magazine

Fibonacci is a wonder of nature. The ratio plays out in the DNA helix structure, the structure of strong hurricanes, and in the scale at which the Pyramids of Giza were built. So, why do traders use it?

Learn Forex: Fibonacci Spiral in Nature

Trading Fibonacci Collisions for Higher Probability Trades

The simple argument is that trading any market is comprised by free willed individuals. Fibonacci places natural limits to how excited or depressed a free-willed mechanism will expand. These are known as Fibonacci ratios, which the most common are 38.2%, 50%, 61.8%, 100%, 161.8%, etc. Therefore, you can look for a Fibonacci ratio to catch the expansion of price or the retracement of a move.

For a beginner’s look at trading with Fibonacci Retracements, click here to register for our free online Fibonacci course.

Using Converging Fibonacci Levels

Have you heard of the 3 best-non-kept secret to investing in Real-Estate? Location, Location, Location. The trading equivalent to the three steps of Real-Estate success is Confirmation, Confirmation, and Confirmation. The best way to do this is to find multiple arguments for the same trade idea. Because there are multiple ways to look use Fibonacci Ratios, you can look to the multiple Fibonacci tools on Marketscope 2.0.

Learn Forex: Access the Fibonacci Tools From the Chart

Trading Fibonacci Collisions for Higher Probability Trades

Presented by FXCM’s Marketscope Charts

The most commonly used tools are the Fibonacci Retracement and Fibonacci Expansion tools. Fibonacci Retracements help you do see if price moves against the trend only to an exhaust itself at a Fibonacci Ratio of 0.382%, 0.50%, 61.8%, or 78.6%. A Fibonacci retracement looks to the adjacent wave so that you’d look to wave 2 to exhaust at a Fibonacci retracement level to Wave 1 in Elliott Wave speak.

A Fibonacci Expansion tool on the other hand, can help you look to a Fibonacci Ratio multiple of a corresponding with-trend move. In other words, the Fibonacci expansion can help you to see if a currency pair finds exhaustion at a Fibonacci relationship. Therefore, you could look at two down-trends and see if the second downtrend hits a Fibonacci ratio level to the prior trend. Look at this great example that called the bottom of the AUDUSD in late January.

Learn Forex: Fibonacci Expansion

Trading Fibonacci Collisions for Higher Probability Trades

Presented by FXCM’s Marketscope Charts

A Fibonacci collision takes place, when a Fibonacci Level meets on two difference courses. This is sometimes known as confluence or cluster. This will often require you to take two different major ranges to see if price turns around at a meeting point of Fibonacci ratios based off these different ranges.

Learn Forex: Fibonacci Collision on AUDUSD Resulted in 850 Pip Rally

Trading Fibonacci Collisions for Higher Probability Trades

Presented by FXCM’s Marketscope Charts

An Example of Fibonacci Confluence with AUDNZD

Last night, The Reserve Bank of New Zealand raised interest rates and encouraged buyers by saying that inflation and rate hikes are likely to increase. This caused a major strengthening in the NZD across the board. This notably happened off a key Fibonacci retracement and expansion level.

Learn Forex: AUDNZD Fibonacci Collision

Trading Fibonacci Collisions for Higher Probability Trades

Presented by FXCM’s Marketscope Charts

When you begin to look for Fibonacci Collisions, you’ll be amazed to see how often these key levels can provide great targets or entries for FX traders. Feel free to reach out to me at my information below or reach me live in DailyFX on Demand with any questions about applying this in real-time. Also, now that you're armed with a method of finding technical targets, feel free to try this information out on a FREE Forex Demo Account with access to multiple markets.

Happy Trading!

Related Articles
  1. Investing News

    China’s Forex Reserves Dropped Significantly

    China’s forex​ reserves dropped by a record $93.9 billion at the end of August to $3.56 trillion because the Central Bank has been selling dollars to provide a cushion to the falling yuan​
  2. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  3. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  4. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  5. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  6. Investing

    Financial News Comparison: Bloomberg Vs. Reuters

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  7. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
  8. Forex Education

    The Top Uses For P2P Currency Exchange

    Peer-to-peer (P2P) currency exchange networks offer a viable and cheaper alternative for buying and selling currencies.
  9. Forex

    Steps To Open An Offshore Forex Account

    Here is a simple breakdown of how to open an offshore forex account for US-based users, including legal requirements.
  10. Entrepreneurship

    Top Forex Trading Apps

    A brief overview of the top apps that help forex traders with on time information, charts and more.

You May Also Like

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  3. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  4. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  5. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
Trading Center