There is something you learned in your math class that can help your forex currency trading system a lot. Who knew that Leonardo Pisano and his Fibonacci numbers could play a big part in making you forex currency trading system a profitable one. It is the ratio of the Fibonacci sequence that is significant for your forex currency trading system, rather than the actual numbers in the sequence. The quotient of the adjacent terms in the series possesses an amazing proportion, roughly 1.618, or its inverse 0.618. This proportion is known by many names: the golden ratio, the golden mean, PHI, and the divine proportion. The dimensional properties that adhere to the ratio of 1.618 occur repeatedly in nature and occur in forex trading systems too. Fibonacci ratios describe the communion between trend and countertrend markets -- 38%, 50% and 62% retracements form the primary pullback levels. Apply these percentages to your forex currency trading system after a trend in either direction to predict the extent of the countertrend swing. Stretch a grid over the most obvious up or down wave, and see how percentages cross key price levels. Convergence between pattern and retracement can point to excellent trading opportunities for your forex currency trading system. Keep in mind that retracements work poorly in an empty space. Always examine highs, lows and moving averages to confirm the importance of an absolute level. Many traders can't figure out where to start a Fibonacci grid in their forex currency trading system. Here is how you use it. The absolute high or low in a price wave isn't the best starting point for a grid most of the time. Instead, look for a small double bottom or double top within the bottleneck where the trend began. Accent one end of the grid over this second high (or low) instead of the first. This will capture a specific Elliott Wave that conforms to the trend you're trying to trade.
