Fibonacci in Forex Trading

Traders apply these ratios to identify potential reversal levels in the market with Fibonacci sequence. These are known as Fibonacci retracement levels:

• 23.6%
• 38.2%
• 50%
• 61.8%
• 100%

These levels often act as support or resistance zones where price tends to stall or reverse.

How to Use Fibonacci Levels

Let’s say a currency pair is trending upwards. You can draw a Fibonacci retracement from the swing low to the swing high. The retracement levels will show you where the price might pull back before continuing the trend.

For stronger signals:

• Look for overlapping levels from multiple Fibonacci retracements.
• These overlaps act as stronger support/resistance zones.

Example

1. Draw your first Fibonacci retracement from the start of the uptrend to the most recent high.
2. Draw another from the most recent swing low to the latest swing high.
3. Identify the overlapping levels—these are high-probability support zones.

You can use this to:

• Enter long trades when the price retraces to a strong support level.
• Set protective stop-loss orders just below that level to manage risk.

Fibonacci Sequence Summary

The Fibonacci and its ratios provide powerful insights into market behavior:

• Fibonacci levels act as natural points of reversal.
• Multiple retracements create stronger signals.
• Use them to fine-tune entries, exits, and stops in your forex strategy.