Fibonacci is a vast subject. It is a complex analysis with different concepts. It is an effective and widely used analysis in Forex trade. However two of its concepts are relatively vital in Forex Trade. These concepts are Retracement and Extension. Let’s have a look at the beginning of Fibonacci.
Origin of Fibonacci sequence:
It is named after an Italian mathematician, Leonardo Fibonacci who devised this analysis by discovering a particular range of numbers. These numbers define the proportion of all the things of the world.
The series of numbers is 0,1,1,2,3,5,8,13,21,34,55,89,……..
The logic behind these numbers is that you get just two numbers and you get the third number by adding the first two numbers .Similarly, you get the fourth number by adding the second and third number and so on.
This ratio is also referred to as Golden ratio as you can easily view this ratio in all natural phenomenons. This ratio is generally used in geometry, architecture and art. It is an irrational number. The interesting point about sequence is that if you measure and calculate the ratio of any number of this series to its next number then you will get 0.618.
The ratio of 55 to 89 is 0.618
Retracement Points of Fibonacci:
The logic behind the retracement Points is that the value of a currency is likely to retrace to an earlier value or price before moving forward. The retracement points are:
0.236, 0.382, 0.618, 0.764
Extension Points of Fibonacci:
0.382, 0.618, 1.000, 1.382, 1.618
Here is a good deal about Fibonacci that you actually do not have to calculate any of the number, there is a Fibonacci calculator to facilitate you. It can calculate all of the figures and numbers for you and place them on Forex Charts.