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# Fibonacci Levels in Forex Trading

In technical analysis for Forex trading, various lines plotted on price charts are called line studies. They include Support and Resistance Lines, Trend Lines, Horizontal lines and Fibonacci levels. The Fibonacci indicator is considered the most basic technical analysis tool in Forex trading. It is an essential tool used in FXLORDS ‘Managed Forex Accounts, Forex Trading Signals, and it is among subjects discussed in the Training Course.

Fibonacci Retracements

Discovered by Leonardo Fibonacci in 1202, the Fibonacci series or Fibonacci sequence is a renowned numeric sequence the can be used to present various support or resistance levels by applying it on price charts. Fibonacci levels are drawn as follows: First, identify the highest and lowest points of a price move on the chart, then after applying the indicator, Fibonacci’s levels will be automatically drawn on the chart. The percentages are 0%, 23.6%, 38.2%, 50%, 61.8% and 100% of the price move from the top to the bottom. After the price move up or down, it often corrects its move and retests Fibonacci levels as if it was facing support and resistance levels at or near the Fibonacci level. Fibonacci Time Zones Fibonacci time zones is a sequence of vertical lines having Fibonacci intervals of 1, 2, 3, 5, 8, 13, 21, 34, etc. Significant price changes are considered to be expected near these lines. To apply this indicator, it is necessary to specify two periods where the price was at the top and bottom of a major price move, which will determine the length of the unit interval. All lines built after applying the indicator will have an interval equal to Fibonacci sequence. Fibonacci Channel Fibonacci channels are several parallel trend lines. To apply this indicator, the first channel of the price move is taken as the unit interval, then, parallel lines are drawn at values equal to Fibonacci sequence, beginning with zero, then 0.618-fold size of the channel, then 1.000-fold, 1.618-fold, 2.618-fold, 4.236-fold, etc. As soon as the price reaches the highest final channel line, correction in the opposite direction of the trend should be expected. Fibonacci Expansion Fibonacci expansion is largely similar to Fibonacci retracement and it is intended to determine the end of the second and third price move. To apply the indicator, first we should determine the price move’s top and retracement, then we place the first and second point at both ends of the move, then the third at the end of its retracement. The corresponding lines drawn will equal 61.8, 100%, and 161.8% of the difference between the price move and its retracement. The third price move is expected to reach near the top level. 