What is Fibonacci Tool?

What is Fibonacci Tool?

Posted on March 15, 2011 Admin

We come to something advance. When you say you want to learn what Fibonacci tool is, then it implies that you are not going to leave your trading career in the hands of some hanky-panky signal seller’s stupid signals. A person who knows Fibonacci tool is a person who reads the markets his own way, makes the trades on his own and makes his money at his own will. Isn’t that the essence of trading and isn’t that precisely every trader’s dream?

We might need to quickly go through the history of this tool. The credit goes to an Italian Mathematician who created a mathematical series of numbers that tends to predict future to a very close degree. It was about 800 years back when he invented this series and his first Job thereon was to gift it to the “Queen of England”. It’s only after that that the series and the formulas were made public and gradually, it came to the attention of markets investors who found it to be just the thing they always fancied. This was the tool for the investing institutions and retails trader to assist them while reading the markets on mathematical parameters and help them find the most likely movements for their trades. Over a period of time, it emerged as a great aid in market decision-making and now, Fibonacci tool, I can tell you is the most widely used technical indicator by all kinds of investors and its use extends to even the biggest of the investing banks.

Fibonacci series or Fibonacci numbers are based on a recurrence relation with the mathematical function F (n)= F(n-1)+f(n-2 ) where ‘N’ denotes a number in the sequence of Fibonacci series of 0,1,1,2,3,5,8,13 and so on till infinity. Each number to follow is simple the sum of the first two numbers. This may scare you reading this but you don’t have to learn all this at all. These formulas are only an indication to what FIBONACCI TOOL is based on as practically you will be using this indicator in only the full and the final shape and in a way, very much relevant to forex market movements.

The application of Fibonacci indicator or Fibonacci tool, to a currency pair under consideration produces three points on each side of the trend where the pair is likely to find its major supports and resistances on the trend. An extension of this indicator can even produce supports and resistances more than three in number which usually is the style of investment institutions who look for rather larger trades but retail trader prefer trading only with three basic levels which can be produced by application of the simplest, the most basic of the Fibonacci versions. Of course we have learnt that we can either trade with the trend or against the trend but where do we join the rally? It is this great indicator that gives us the decision-making points and tells us where to take our trades. We go against the trend or in favor of it, is our personal choice. Indicator’s job is to give the crucial points and it does its job pretty well.

Fibonacci tool comes to you free on your charting applications and can be deployed to identify the current trend and the crucial supports and resistances in the trend, with just a click of a button. It doesn’t matter which broker and which trading platform, the fact is that Fibonacci tool is one indicator that You will find everywhere. However, it’s the application of this indicator that is tricky and why shouldn’t it be? Wealth is not for everyone to take; Fibonacci cracked the series, you crack the application and then you claim your funds.

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