# Application of Fibonacci Strategy in the World of Trading

The Fibonacci trading strategy is a popular trading tool that uses some very original mathematical metrics to attempt to calculate trade entry and exit points. The progress of this philosophy began in the 12th century and the numerical patterns associated with it have been identified in all areas of nature, from the ratio of people's faces to the circular pattern of the Milky Way.

Fans of Fibonacci principles see it as a basis for analyzing price movements and a way to explain the ups and downs of the market in a natural way, and they want to put their money behind trades based on Fib analysis.

Increasing the description of the effects of the Fibonacci strategy on the market is useful especially if you don't follow it directly. Many other investors will use them, and there are many illustrations where they have become a sign of efficient trading, some of which are described in this section. Real Fib grades are something to watch out for and are often mentioned in analyst research memos or informational opinions.

### WHAT IS FIBONACCI?

What is Fibonacci, or rather, who is Fibonacci? Born in Pisa, Italy in 1170, Leonardo Bonacci earned the nickname Fibonacci and was drawn to the Hindu-Arabic value system. His research includes simple calculations that at first glance may not be of much help in calculating at all, especially price movements in financial markets.

Quoting values sequentially and increasing the first 2 values together, he creates this information file:

**0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89…**

Memo: method( 1+1=2, 1+2=3, 2+3=5, 3+5=8…) starts after the nil and the first.

The pattern attracts Fibonacci because no matter how far you quote the value queue, any value in that queue is 1,618 times greater than the previous one. This value, Phi, also refers to the Golden Comparison, a mysterious common comparison associated with patterns found in architecture, geometry, art and life, and includes flower petal patterns and the manufacture of plant agents.

The next step is to reverse the method, sorting any value from the value that follows it in the queue and observing the pattern that the value obtained is always 0.618– for example, 21 or 34= 0.618.

Each value is broken down by the next second value – for example, 21 or 55 – always equals 0.3819 and each value in the queue is broken down by the next third value equals 0.263.

The main Fib levels extracted from the note values in relatively simple Fibonacci records are 1.618, 1.3819, 1.263 and overlap 0.618, 0, 3819 and 0.263. Applied to financial markets, the theory says that after moving to one goal, the price retracement fell back to one of those Fib levels with a dangerous wave moments before moving on to the early movement ideal.

### Retracement& Fibonacci extension

Fibonacci retracement and Fibonacci extension are two terms that use the same core Fibonacci principles to describe different types of price movements.

### What is Fibonacci Retracement?

In the chart at the bottom, the price of gold rose from $1. 679( A) becomes $1. 915( B), and as the momentum associated with the move subsides, the price retraces to $1. 769(C), which is a 61.8% Fib rate. The price held at that level, and after the confirmation, then continued the upward movement.

The Fib strategy can be used for downward or upward price movements. Over time frames of different durations, the underlying momentum in the EURUSD currency market has decreased.

The short time retracement on the chart at the bottom proves a retracement from 1.154 to 1.177 so a short time price escalation to Fib 23.6%.

The tip for both investors and traders is to be able to see which peaks and puddles are being used and at which Fib retracement levels are expected to lose power. Each Fibonacci level is calculated by dividing the zone between the major and minor forces and practicing Fibonacci queue comparisons.

As a rule of thumb, the underlying momentum continues to be strong, it continues to be probable that each retracement will mature shorter and so will the 23.6% Fib. A softer move, an illustration of the gold market, could see prices retrace further to the 61.8% Fib.

### Why Does Fibonacci Work

As with all trading strategies, there are many who oppose and support how useful the Fib strategy is. While there is some gray zone near this point, the alibi at the bottom of this helps explain why this point is so popular.

Simple but solid– The core principles of the Fib strategy are relatively easy to understand. Some technical analysis markers use much more complex methods to improve trading signals and Fib not one of them. Ideas that are easier to understand have a better chance of being adopted on a larger scale.

Natural regularity– The references found in nature, the pattern of the tombstone and the star rule give an impulsive feeling that there is something just right about Fibs.

A self-fulfilling traitor– If a particular idea is adopted by many people the market ratio is good, then that alone is enough to get them to work. Moreover, those who do not think that the Fib philosophy is under the provision of capital can still find profit from exploring the actions of others. Fibs are one of the most popular technical markers, and most people in the market will at least want to watch them and possibly trade them.

Easy to use– Open any trading dashboard and you will be able to create a market with a price chart where the real-time price lies at the Fib level. The software tool used to cover the Fib levels involves clicking on the peaks and pools of the price chart and after that all the Fib levels are placed in front of you. The lightness of making Fibs only increases their reach.