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Forex Indicators - Fibonacci Retracements

Harold Hsu

The Fibonacci retracement indicator is a very popular tool among Forex traders, and it is based on a set of key numbers identified in 1175 by Leonardo Fibonacci, an Italian mathematician.

What Are Fibonacci Numbers?

The Fibonacci series is derived by first adding numbers as follows:

2+1 = 3
3+2 = 5
5+3 = 8
8+5 = 13
13+8 = 21

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8%. 61.8% is the first Fibonacci ratio.

The next Fibonacci ratio is derived by taking the ratio of the first number and third number. For example: 3/8, 5/13, 8/21 and so on. You will roughly get 38.2% this time. This is the second important Fibonacci ratio.

The third Fibonacci ratio is calculated by taking the ratio of the first number and fourth number. For example: 3/13, 5/21 and so on. You'll get roughly 23.6%

How Do I Use Fibonacci Ratios In Forex Trading?

In technical chart analysis, Fibonacci levels are usually created by taking a chart peak and trough, and dividing the vertical distance by the key Fibonacci ratios. These graphical levels on the trading chart are important support/resistance areas.

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