Forex trading can be extremely complex across the board, but since it is the world’s largest market, it inevitably attracts curiosity. Essentially, the trading of foreign currencies ups the ante compared to other forms of investment due to multiple economies being involved at once. These can change at any given time with big consequences. Quick gains can easily become even quicker losses. The high risk factor can make it a particularly tough market for new investors to break into. Because of its complexity, traders need reliable systems to try and make predictions as accurate as possible. One such system is fbionacci forex.
Explanation
This system basically uses what are known as Fibonacci retracements in order to determine opportune times to invest or make other decisions in the market. Fibonacci retracement levels are essentially the points when the market settles after a significant rise or fall. Levels are typically calculated at price changes of 38.2 percent, 50 percent, and 61.8 percent. The 50 percent point is used as a reference point, as market trends often retrace in their behavior before continuing. In the simplest possible terms, these retracements locate points where the market stops going down (support) and where the market stops going up (resistance).
Application
Fibonacci and similar techniques are most often used in technical analysis, the interpretation that each currency has a limited range it can fluctuate in and out of. This information is used to look at past trends to try and predict future ones. Fibonacci retracements make this a more precise process. This style of trading is attractive to many investors because it shows objective data, making it more comfortable to make big decisions. It also reinforces the idea that currency trends are dictated by marketing basics like supply and demand, which can make it attractive to newer investors. Retracements are also shown in charts, making them a good option for visual learners.
Strategies
There are quite a few market strategies commonly associated with Fibonacci. One is to buy near the 38.2 mark and placing a stop-loss order around the 50 percent mark. Put simply, this order is an exit plan to minimize risk. Similarly, some prefer to buy near the 50 percent level with a stop-loss ordered around 61.8. In general when nearing a sale, Fibonacci levels are used to determine profit targets. They can also be generally used to determine when other traders are jumping ship allowing for some potential bargains if you’re willing to risk waiting for another uptrend.
Brokers
While it’s possible to monitor these trends and pinpoint retracements on your own, it is an extremely complex process and not necessarily a recommendable one. It’s a much better idea to hire a broker to assist with these matters. This way, you’ll have another pair of eyes on your interests, and you won’t have to “babysit accounts” all the time. Additionally, a broker can do things like pass the previously mentioned stop-loss order to protect you from unnecessary losses. They can also educate you on these processes, and you’ll always have help ready to answer when you need it. Having an expert on hand for complicated situations never hurts and it can save you a lot of money in the long run.
Forex is a potentially lucrative market, but it’s important to remember that not every story is a success story. Some losses are inevitable, but that shouldn’t keep you from trying. Keep a handle on your emotions, and with expert help and proper analysis you can become an effective trader.
