Forex training will require the understanding of Fibonacci. Fibonacci numbers are a series of numbers whereby each succeeding number is added to the sum of the previous two numbers. For example, a Fibonacci scale would be: 1, 1, 2, 3, 5, 8, 13, 21, 34, etc… There are several interesting relationships within this succession of numbers, such as the fact that any number on the Fibonacci scale is roughly 1.618 times the number listed previously in the succession. This numerical study is named after Leonardo of Pisa, who is credited for its discovery.
Leonardo was born in Pisa, Italy in 1170 A.D. to Alessandra, his mother who died when he was nine years old, and Guglielmo, his father who was nicknamed “Bonaccio”, meaning “good natured”). It wasn’t until after he died that Leonard was given the nickname Fibonacci, which was derived from filius Bonacci, which means “son of Bonaccio”.
Growing up with a father who ran the trading post of Pisa, Leonard traveled a lot with his father to North Africa. It was there that he learned the Hindu-Arabic numerical system. Leonardo seemed to be a natural with numbers and quickly realized that the Hindu-Arabic system was easier to use and far more efficient than the Roman numerals he had been taught. Leonardo traveled extensively throughout the Mediterranean region studying under the foremost Arab mathematicians of his time. Upon his return at the age of 32, he published his findings in Liber Abaci, thus introducing the Western World to the Hindu-Arabic numerical system.
Leonardo was considered by most to be the most talented mathematician of his time. In modern times, Leonardo is best known for his contributions in introducing and spreading the Hindu-Arabic numerical system to the Western World, largely through his book Liber Abaci and for the Fibonacci numerical studies, which were named after him. It is rumored that he did not actually discover this system, but is credited for its rise in popularity because he used it in example in his book.
Fibonacci numbers are often used in Technical Analysis in the Forex trading industry. In general, the study of Fibonacci numbers includes anticipating changes in trends of prices as they get closer to the lines which are created by the studies. These are then called Fibonacci lines. Using Fibonacci tools is actually quite simple. Observations and studies have indicated that retracement levels on the Fibonacci scale function best in the zones they cover. The more often these lines come together near or directly at a price level, the more reliable they are in deciding reversal points or pauses.
The Fibonacci studies, lines and scales are just one method of prediction in the field of Forex trading. Some may argue that this is not a reliable method and is more akin to gambling. However, for many traders, this system of prediction works well and has a history of success for them. It is important to know the different systems and methods of prediction so that you, the Forex trader, can decide which one works to your advantage. Forex Justice is here to assist you in making the most informed decision possible.