Fibonacci Forex Trading
Fibonacci strategies in the context of forex trading use the Fibonacci sequence of numbers, ratios and patterns to inform entry and exit points. In this guide, we explain how to implement Fibonacci retracement levels and extensions. We also cover what you need from a broker, the best analysis software, resources, and how to get started Fibonacci forex trading.
Forex Brokers With Fibonacci Chart Patterns
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1
FOREX.comActive Trader Program With A 15% Reduction In Costs
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$1000.01 Lots1:50NFA, CFTCForex, Stocks, Futures, Futures OptionsMT4, MT5, TradingView, eSignal, AutoChartist, TradingCentralWire Transfer, Credit Card, Debit Card, Visa, Mastercard, Skrill, Neteller, ACH TransferUSD, EUR, GBP, CAD, AUD, JPY, CHF, PLN -
2
NinjaTrader
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$00.01 Lots1:50NFA, CFTCForex, Stocks, Options, Commodities, Futures, CryptoNinjaTrader Desktop, Web & Mobile, eSignalACH Transfer, Debit Card, Wire Transfer, ChequeUSD -
3
Interactive Brokers
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$0$1001:50FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA, AFMStocks, Options, Futures, Forex, Funds, Bonds, ETFs, Mutual Funds, CFDs, CryptocurrenciesTrader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentralCheque, ACH Transfer, Wire Transfer, Automated Customer Account Transfer Service, TransferWise, Debit CardUSD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF -
4
IGForex trading involves risk. Losses can exceed deposits.
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$00.01 Lots1:30 (Retail), 1:250 (Pro)FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB, AFMCFDs, Forex, Stocks, Indices, Commodities, ETFs, Futures, Options, Crypto, Spread BettingWeb, ProRealTime, L2 Dealer, MT4, TradingView, AutoChartist, TradingCentralPayPal, Wire Transfer, Mastercard, Credit Card, Visa, Debit CardUSD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD -
5
OANDA USCFDs are not available to residents in the United States.
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$00.01 Lots1:50NFA, CFTCForex, Crypto with Paxos (Cryptocurrencies are offered through Paxos. Paxos is a separate legal entity from OANDA)OANDA Trade, MT4, TradingView, AutoChartistWire Transfer, Visa, Mastercard, Debit Card, ACH TransferUSD, EUR, GBP, CAD, AUD, JPY, CHF, HKD, SGD -
6
Videforex20% to 200% Deposit Bonus
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$250$0.011:500Binary Options, CFDs, Forex, Indices, Commodities, CryptoTradingViewSkrill, Perfect Money, Bitcoin Payments, Neteller, Credit Card, Visa, Mastercard, Ethereum PaymentsUSD, EUR, GBP, AUD, RUB -
7
InstaTrade
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$10.011:1000BVI FSCFISP, CFDs, Forex, Stocks, Indices, Commodities, Cryptos, FuturesInstaTrade Gear, MT4Visa, Mastercard, Wire Transfer, Credit Card, Debit Card, Bitcoin Payments, Ethereum PaymentsUSD, EUR, RUB -
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Plus500 USWelcome Deposit Bonus up to $200Trading with leverage involves risk.
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$1000.0 LotsCFTC, NFAFutures on Forex, Commodities, Cryptos, Indices, Interest RatesWebTrader, AppACH Transfer, Wire Transfer, Debit Card, Mastercard, VisaUSD -
9
CloseOption$10 Welcome Gift
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$5$1National Bank of GeorgiaBinary Options on Forex & CryptosOwnPayPal, WebMoney, Mastercard, Perfect Money, Wire Transfer, Bitcoin Payments, Ethereum PaymentsUSD -
10
World Forex100% Deposit Bonus
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$10.01 Lots1:1000SVGFSAForex, CFD Stocks, Metals, Energies, Cryptos, Digital ContractsMT4, MT5Wire Transfer, Debit Card, Credit Card, Visa, Mastercard, Google Wallet, Apple Pay, Perfect Money, Bitcoin Payments, VoletUSD, EUR, RUB
This is why we think these brokers are the best in this category:
- FOREX.com - FOREX.com continues to uphold its stature as a premier FX broker, offering over 80 currency pairs and boasting some of the most competitive fees in the industry. With EUR/USD spreads dipping as low as 0.0 and $5 commission per $100k, it stands out. Moreover, its SMART Signals help to identify price behaviors across numerous major currency markets.
- NinjaTrader - NinjaTraders supports the trading of popular currencies including the EUR/USD. The software also offers advanced features to streamline the trading experience, including complex order types like market if touched (MIT) and one cancels other (OCO).
- Interactive Brokers - IBKR presents an extensive range of over 100 major, minor, and exotic forex pairs, surpassing the offerings of nearly all leading alternatives, though not CMC Markets. Forex trading occurs over multiple platforms and boasts institutional-grade spreads starting from 0.1 pips and 20 complex order types, including brackets, scale, and one-cancels-all (OCA) orders.
- IG - IG offers an above-average suite of 80+ currency pairs on its proprietary web platform, mobile app or MetaTrader 4, with more advanced charts and forex analysis tools available on the ProRealTime software. Forex spreads are competitive based on tests, starting from 0.1 pips on majors like the EUR/USD.
- OANDA US - OANDA offers a diverse selection of 68 currency pairs, more than many alternatives. The broker’s in-house platform offers superb day trading capabilities via powerful TradingView charts, including 65+ technical indicators and 11 customizable chart types.
- Videforex - Videforex offers trading on 35 currency pairs through leveraged CFDs with spreads from 0.1 pips. Alternatively, traders can use binaries to speculate on upward/downward price movements with payouts up to 98%. Integrated technical analysis, economic calendars, and market news, all available within the platform, help support FX trading decisions.
- InstaTrade - InstaTrade offers a huge selection of around 100 currency pairs. It provides spreads starting at 0.0 on majors, plus integrated forex analysis in the web platform, featuring signals, plus technical and fundamental summaries. Additionally, InstaTrade offers educational modules covering forex basics for beginners, including margin trading and risk management.
- Plus500 US - Plus500 US offers futures trading on a small selection of 13 currencies, including popular pairs like the EUR/USD and GBP/USD. Day trading margins are competitive, starting from $40, while the educational resources do an excellent job of breaking down the basics of forex futures for new traders.
- CloseOption - CloseOption offers binaries on 25+ forex pairs, including majors like EUR/USD and a few minors like AUD/JPY. Payouts vary by currency, with decent typical payouts of 75% for GBP/USD.
- World Forex - World Forex offers CFD and digital contract trading on 53 forex pairs, including EUR/USD and GBP/EUR. High leverage is available for CFDs, which can be accessed with competitive spreads on certain account types.
Fibonacci Forex Trading Comparison
| Broker | Forex Assets | EUR/USD Spread | Forex App Rating | Minimum Deposit | Regulator |
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80+ | 1.2 | / 5 | $100 | NFA, CFTC |
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50+ | 1.3 | / 5 | $0 | NFA, CFTC |
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100+ | 0.08-0.20 bps x trade value | / 5 | $0 | FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA, AFM |
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80+ | 0.8 | / 5 | $0 | FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB, AFM |
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65+ | 1.6 | / 5 | $0 | NFA, CFTC |
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35+ | 0.1 | / 5 | $250 | - |
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65 | 0.0 | - | $1 | BVI FSC |
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13 | 0.75 | / 5 | $100 | CFTC, NFA |
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20+ | No fee - payouts approx. 80% (Copper) | - | $5 | National Bank of Georgia |
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53 | From 0.6 | - | $1 | SVGFSA |
FOREX.com
"FOREX.com remains a best-in-class brokerage for active forex traders of all experience levels, with over 80 currency pairs, tight spreads from 0.0 pips and low commissions. The powerful charting platforms collectively offer over 100 technical indicators, as well as extensive research tools."
Christian Harris, Reviewer
FOREX.com Quick Facts
| Bonus Offer | Active Trader Program With A 15% Reduction In Costs |
|---|---|
| GBPUSD Spread | 1.3 |
| EURUSD Spread | 1.2 |
| EURGBP Spread | 1.4 |
| Total Assets | 80+ |
| Leverage | 1:50 |
| Platforms | MT4, MT5, TradingView, eSignal, AutoChartist, TradingCentral |
| Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, CHF, PLN |
Pros
- FOREX.com offers industry-leading forex pricing starting from 0.0 pips, alongside competitive cashback rebates of up to 15% for serious day traders.
- There’s a wealth of educational resources including tutorials, webinars, and a stacked YouTube channel to help you get educated in the financial markets.
- The in-house Web Trader continues to shine as one of the best-designed platforms for aspiring day traders with a slick design and over 80 technical indicators for market analysis.
Cons
- FOREX.com's MT4 platform offers approximately 600 instruments, significantly fewer than the over 5,500 available on its non-MetaTrader platforms.
- There’s no negative balance protection for US clients, so you may find yourself owing more money than your initial deposit into your account.
- Demo accounts are frustratingly time-limited to 90 days, which doesn’t give you enough time to test day trading strategies effectively.
NinjaTrader
"NinjaTrader continues to meet the demands of active futures traders looking for low fees and premium analysis tools. The platform hosts top-rate charting features including hundreds of indicators and 10+ chart types."
Tobias Robinson, Reviewer
NinjaTrader Quick Facts
| GBPUSD Spread | 1.6 |
|---|---|
| EURUSD Spread | 1.3 |
| EURGBP Spread | 1.6 |
| Total Assets | 50+ |
| Leverage | 1:50 |
| Platforms | NinjaTrader Desktop, Web & Mobile, eSignal |
| Account Currencies | USD |
Pros
- You can get thousands of add-ons and applications from developers in 150+ countries
- NinjaTrader is a widely respected and award-winning futures broker and is heavily authorized by the NFA and CFTC
- Low fees are offered, with $50 day trading margins & commissions from $.09 per micro contract
Cons
- There is a withdrawal fee on some funding methods
- The premium platform tools come with an extra charge
- Non forex and futures trading requires signing up with partner brokers
Interactive Brokers
"Interactive Brokers is one of the best brokers for advanced day traders, providing powerful charting platforms, real-time data, and customizable layouts, notably through the new IBKR Desktop application. Its superb pricing and advanced order options also make it highly attractive for day traders, while its diverse range of equities is still among the best in the industry."
Interactive Brokers Quick Facts
| GBPUSD Spread | 0.08-0.20 bps x trade value |
|---|---|
| EURUSD Spread | 0.08-0.20 bps x trade value |
| EURGBP Spread | 0.08-0.20 bps x trade value |
| Total Assets | 100+ |
| Leverage | 1:50 |
| Platforms | Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentral |
| Account Currencies | USD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF |
Pros
- IBKR continues to deliver unmatched access to global stocks with tens of thousands of equities available from 100+ market centres in 24 countries, most recently the Saudi Stock Exchange.
- There's a vast library of free or paid third-party research subscriptions catering to all types of traders, plus you can enjoy commission reimbursements from IBKR if you subscribe to Toggle AI.
- The TWS platform has clearly been built for intermediate and advanced traders and comes with over 100 order types and a reliable real-time market data feed that rarely goes offline.
Cons
- Support can be slow and frustrating based on tests, so you might find it challenging to reach customer service representatives promptly or encounter delays in resolving issues.
- You can only have one active session per account, so you can’t have your desktop program and mobile app running simultaneously, making for a sometimes frustrating trading experience.
- IBKR provides a wide range of research tools, but their distribution across trading platforms and the web-based 'Account Management' page lacks consistency, leading to a confusing user experience.
IG
"IG continues to provide a comprehensive package with an intuitive web platform, best-in-class education for beginners, advanced charting tools bolstered by its recent TradingView integration, real-time data, and fast execution speeds for experienced day traders."
IG Quick Facts
| GBPUSD Spread | 0.9 |
|---|---|
| EURUSD Spread | 0.8 |
| EURGBP Spread | 0.9 |
| Total Assets | 80+ |
| Leverage | 1:30 (Retail), 1:250 (Pro) |
| Platforms | Web, ProRealTime, L2 Dealer, MT4, TradingView, AutoChartist, TradingCentral |
| Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD |
Pros
- The proprietary web-based platform continues to caters to traders of all levels, with advanced charting tools and real-time market data useful for day trading, while IG has also added TradingView integration.
- As a well-established broker, IG operates under strict regulatory guidelines in multiple jurisdictions, maintaining a high level of trust.
- IG offers an extensive collection of professional and engaging educational resources, including webinars, articles, and analysis.
Cons
- IG applies an inactivity fee of $12 per month after 2 years, deterring casual investors.
- While there is negative balance protection in the UK and EU, there is no account protection or guaranteed stop losses for US clients.
- Stock and CFD spreads still trail the cheapest brokers like CMC Markets based on tests.
OANDA US
"OANDA remains an excellent broker for US day traders seeking a user-friendly platform with premium analysis tools and a straightforward joining process. OANDA is also heavily regulated with a very high trust score."
OANDA US Quick Facts
| GBPUSD Spread | 3.4 |
|---|---|
| EURUSD Spread | 1.6 |
| EURGBP Spread | 1.7 |
| Total Assets | 65+ |
| Leverage | 1:50 |
| Platforms | OANDA Trade, MT4, TradingView, AutoChartist |
| Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, CHF, HKD, SGD |
Pros
- The broker offers a transparent pricing structure with no hidden charges
- Seasoned day traders can access industry-leading tools, including an MT4 premium upgrade and advanced charting provided by MotiveWave
- The broker's API facilitates access to 25 years of deep historical data and rates from 200+ currencies
Cons
- The range of day trading markets is limited to forex and cryptos only
- There's only a small range of payment methods available, with no e-wallets supported
- It's a shame that customer support is not available on weekends
Videforex
"Videforex will serve traders looking for a no-frills, easy-to-use platform to speculate on the direction of popular financial markets through binaries. With a sign-up process that takes a matter of minutes and a web-accessible platform, getting started is a breeze. "
Videforex Quick Facts
| Bonus Offer | 20% to 200% Deposit Bonus |
|---|---|
| GBPUSD Spread | 0.1 |
| EURUSD Spread | 0.1 |
| EURGBP Spread | 0.1 |
| Total Assets | 35+ |
| Leverage | 1:500 |
| Platforms | TradingView |
| Account Currencies | USD, EUR, GBP, AUD, RUB |
Pros
- Traders can earn up to 98% payouts on 100+ assets with the broker’s binary options, bringing it in line with competitors like IQCent.
- Videforex regularly runs trading contests, offering practice opportunities and cash prizes to beginners and experienced traders, with position sizes from just ¢0.01.
- Videforex is one of the few brokers with 24/7 multilingual video support, providing comprehensive assistance for active traders.
Cons
- The absence of any educational tools is a serious drawback for newer traders who can find blogs, videos and live trading sessions at category leaders.
- Videforex lacks authorization from a trusted regulator, meaning traders may receive little to zero safeguards like segregated client accounts.
- The client terminal needs improvements based on our latest tests, sporting sometimes slow and unresponsive widgets which could dampen the experience for day traders.
InstaTrade
"Although InstaTrade offers active trading on a comprehensive platform, it stands out with its fairly unique Fixed Income Structured Product (FISP), providing passive investment opportunities with up to 50% returns in 6 months if conditions are met. "
InstaTrade Quick Facts
| GBPUSD Spread | 0.2 |
|---|---|
| EURUSD Spread | 0.0 |
| EURGBP Spread | 2.8 |
| Total Assets | 65 |
| Leverage | 1:1000 |
| Platforms | InstaTrade Gear, MT4 |
| Account Currencies | USD, EUR, RUB |
Pros
- InstaTrade claims to "guarantee" returns through the structured element of its passive trading solution (FISP), with applications approved within 24 hours.
- InstaTrade TV, consisting of video interviews and valuable market insights spanning equities, cryptos and more, helps identify opportunities and inform short-term trades.
- VPS hosting caters to algo trading strategies with a dedicated physical server providing rapid execution speeds as low as 9 milliseconds.
Cons
- Profits are only guaranteed in the FISP if investors do not reach the 50% profit level and attract other users with a total sum of $4 for each dollar in compensation.
- InstaTrade’s growing educational tools provide valuable information for aspiring traders, but still trail category leaders like eToro with no structured course based on experience level.
- Marketing of the FISP, especially phrasing around the “guarantee of profitability” and the “elimination of risks of trading on financial markets” raises concerns.
Plus500 US
"Plus500 US stands out as an excellent choice for beginners, offering a very user-friendly platform, low day trading margins, and access to the Futures Academy to enhance trading skills."
Michael MacKenzie, Reviewer
Plus500 US Quick Facts
| Bonus Offer | Welcome Deposit Bonus up to $200 |
|---|---|
| EURUSD Spread | 0.75 |
| Total Assets | 13 |
| Platforms | WebTrader, App |
| Account Currencies | USD |
Pros
- The trading app provides a terrific user experience with a modern design, a clean layout and mobile-optimized charts
- The straightforward account structure, pricing model and web platform offer an easier route into futures trading than rivals like NinjaTrader
- Plus500 US excels for its low fees with very competitive day trading margins and no inactivity fees, live data fees, routing fees, or platform fees
Cons
- Despite competitive pricing, Plus500 US lacks a discount program for high-volume day traders, a scheme found at brokers like Interactive Brokers
- While Plus500 US continues to broaden its investment offering, it's currently restricted to around 50+ futures with no stocks
- Plus500 US does not offer social trading capabilities, a feature available at alternatives like eToro US which could strengthen its offering for aspiring traders
CloseOption
"CloseOption is a good pick for traders seeking a user-friendly binary options platform with high payouts and joining bonuses."
CloseOption Quick Facts
| Bonus Offer | $10 Welcome Gift |
|---|---|
| GBPUSD Spread | No fee - payouts approx. 80% (Copper) |
| EURUSD Spread | No fee - payouts approx. 80% (Copper) |
| EURGBP Spread | No fee - payouts approx. 80% (Copper) |
| Total Assets | 20+ |
| Platforms | Own |
| Account Currencies | USD |
Pros
- Multiple global payment methods are available
- The user-friendly platform is compatible with most web browsers
- New traders can get started with a $5 minimum deposit
Cons
- Clients need to deposit $50,000+ to qualify for the best payouts
- CloseOption is not regulated by a well-regarded trading authority
- Binary options are only available on fiat and digital currencies
World Forex
"World Forex provides both highly leveraged CFDs and digital contracts, making this a good broker for clients who want flexible and rewarding ways to trade. The copy trading service will also appeal to newer traders."
World Forex Quick Facts
| Bonus Offer | 100% Deposit Bonus |
|---|---|
| GBPUSD Spread | From 0.6 |
| EURUSD Spread | From 0.6 |
| EURGBP Spread | From 0.6 |
| Total Assets | 53 |
| Leverage | 1:1000 |
| Platforms | MT4, MT5 |
| Account Currencies | USD, EUR, RUB |
Pros
- Educational content
- 10+ accepted payment methods
- VPS hosting
Cons
- Weak regulation
- No negative balance protection
- Withdrawal fees apply
The Fibonacci Sequence
Italian mathematician Leonardo Pisano, nicknamed Fibonacci, introduced the West to what is now known as the Fibonacci sequence back in the 13th century.
The Fibonacci sequence is an infinite numerical sequence. Each number in the series is the sum of the proceeding two values (after 0 and 1): 0, 1, 1, 2, 3, 5, 8, 13, 21 etc. Each number is approximately 1.618 times greater than the previous. This ratio, 1.618, is also referred to as Phi or the Golden Ratio.
The Golden Ratio can be depicted in a spiral shape and, interestingly, is a shape that crops up across the natural world. From rose petals to seashells, architecture, human faces and even constellations in outer space. There are some that believe that the spiral shape extends beyond nature and can be used to depict human behaviour too. The theory goes that as people adjust their behaviour in response to change, they do so at a rate proportionate to the Fibonacci ratios.
In the context of trading forex, it’s not the numbers in the sequence themselves that we’re interested in, but the difference between them. The ratios unveil patterns which in turn help highlight opportunities.
Setting Up A Fibonacci Forex Trading Strategy
The application of the Fibonacci sequence to forex day trading is relatively straightforward. It is most commonly used as part of a trend-trading strategy. Traders adopting this strategy anticipate that price will pivot at the points outlined by Fibonacci levels.
The basic premise is that in a market uptrend, you buy on a retracement at a Fibonacci support level, while during a downtrend, you sell at a Fibonacci resistance level. Ideally, you want to be looking at the highest and lowest swings.
Forex Trading Using Fibonacci Strategies
Fibonacci sequence ratios are used to predict retracement levels.
Retracements
The theory behind Fibonacci forex trading retracements is that after a significant market swing, price will return at least in part, to a particular point, before it continues in its initial direction.
So in practice, the numbers and formulas that feed into your retracement levels may allow you to predict future price points.
As we’ve seen above, each new number in the Finbonacci sequence is approximately 61.8 percent of the consecutive number. Which means that it is approximately 38.2% of the number after that, and approximately 23.6 percent of the number after that. These ratios: 61.8, 38.2, and 23.6 are our Fibonacci retracement levels.
On a chart, they are marked horizontally to make a grid within the parameters of the high and low levels chosen. When a trend is moving in a certain direction, the belief is that the price reversal point will coincide with the interception of these horizontal lines, before it resumes in the direction of the original trend. Fibonacci retracement levels help traders to identify potential price reversal points i.e points of opportunity.
Some models also use the 50 percent retracement level. Whilst it is not a Fibonacci ratio, it is widely acknowledged to be an important potential turning point as recognised in Dow theory.
The theory behind why trends unfold in this manner, is that human behaviour inherently follows the ratios of the Fibonacci sequence i.e. if a trend is moving too quickly in one direction, the market will respond relative to the ratios outlined in the sequence.
Extensions
The next step is supplementing your forex trading strategy with extension levels. Extensions use Fibonacci numbers and patterns to determine profit taking points.
Extensions continue past the 100% mark and indicate possible exits in line with the trend. For the purposes of using Fibonacci numbers for day trading forex, the key extension points consist of 161.8%, 261.8% and 423.6%.
Fibonacci Forex Trading Strategies In Action
Examples of forex trading strategies that use Fibonacci ratios include:
- Buying close to the 50 percent point with a stop-loss order just under the 61.8 percent mark
- Buying close to the 38.2 percent retracement point with a stop-loss order just under the 50 percent mark
- In a sell position towards the top of a substantial swing, using the Fibonacci retracement levels as profit collecting points
Limitations
Fibonacci retracement levels are not a guarantee. Whilst useful indicators, Fibonacci forex trading levels cannot actually guarantee a pivot point. The price may not reverse at a Fibonacci level or any other estimated level for that matter. They can be used to identify areas of interest but cannot guarantee a specific point of change.
It is also worth noting that when looking at small price movements, Fibonacci levels may not offer much insight. When levels are very close together it can seem that every point is important. They are best used on larger swings.
Furthermore, using Fibonacci tools is somewhat subjective. In a single day there will be multiple price swings, meaning that not everyone will be connecting the same two points. To help you identify areas of importance, draw retracement levels on all major price swings and look out for areas with a cluster of Fibonacci levels.
Our recommendation is to always use Fibonacci forex trading strategies in combination with other tools and insights. Trend indicators such as moving averages or Bollinger bands are useful in determining the direction of an asset whilst relative strength index and Bulls and Bears powers are often used to determine whether an asset has been overbought or oversold.
Broker Tools
When forex trading using Fibonacci strategies, the numbers, formulas, ratios and patterns can appear daunting.
However, advanced charting software will do the heavy lifting for you, offering retracement and extension level tools. So make sure you choose a broker whose software you’re comfortable using.
As with learning any new forex strategy, the more resources you can get your hands on the better. Therefore, it’s worth exploring whether your broker offers any Fibonacci forex trading strategy guidance, be it through PDFs or tutorial videos.
YouTube can also be a great way to see the numbers and patterns being applied in real life examples.
For further guidance, see our forex broker reviews.
Final Word
Trading forex with Fibonacci strategies uses ratios and formulas to determine where support and resistance are likely to occur. Whilst the sequence itself can seem daunting, its application to forex day trading is relatively simple. Fibonacci forex trading strategies are widely used by retail and corporate investors and most investing platforms offer the feature as standard.
Of course, every trader is different and there are no guaranteed returns with a Fibonacci forex trading strategy. With that in mind, always consider retracements and extensions as tools to help inform your broader market angle.
FAQs
When Is The Best Time To Use A Fibonacci Forex Trading Strategy?
The Fibonacci forex trading technique is most effective when the market is trending. Price action is often most prevalent when the market opens and closes.
What Do You Need From A Broker To Use A Fibonnaci Forex Trading Strategy?
The best forex day trading platforms and brokers will provide easy-to-use software with dedicated retracement and extension tools.
What Is The Best Way To Understand The Fibonacci Ratios?
Before you start trading forex with real money, open a demo account at a broker and play around with the Fibonacci numbers, patterns and formulas.
What Are The Limitations Of Using A Fibonacci Forex Trading Strategy?
Fibonacci levels cannot pinpoint an exact entry level. They only provide an estimated entry area. With that in mind, they should inform but not dictate your forex trading decisions.
Can A Fibonacci Forex Trading Strategy Work Alongside Other Techniques?
Yes, forex trading using Fibonacci & Elliott Wave PDFs are one good example.