What’s Fibonacci Forex Trading?

Fibonacci forex trading is the basis of many forex trading systems used by a great number of professional forex brokers around the globe, and many billions of dollars are profitable traded every year based on these trading techniques.

Fibonacci was an Italian mathematician and he is best remembered by his world famous Fibonacci sequence, the definition of this sequence is that it’s formed by a series of numbers where each number is the sum of the two preceding numbers; 1, 1, 2, 3, 5, 8, 13 ...But in the case of currency trading what is more important for the forex trader is the Fibonacci ratios derived from this sequence of numbers, i.e. .236, .50, .382, .618, etc.

These ratios are mathematical proportions prevalent in many places and structures in nature, as well as in many man made creations.

Forex trading can greatly benefit from this mathematical proportions due to the fact that the oscillations observed in forex charts, where prices are visibly changing in an oscillatory pattern, follow Fibonacci ratios very closely as indicators of resistance and support levels; maybe not to the last cent, but so close as to be really amazing.

Fibonacci price points, or levels, for any forex currency pair can be calculated in advance so that the trader will know when to enter or exit the market if the prediction given by the Fibonacci forex day trading system he uses fulfills its predictions.

Many people tries to make this analysis overly complicated scaring away many new forex traders that are just beginning to understand how the forex market works and how to make a profit in it. But this is not how it has to be. I can’t say it’s a simple concept but it is quite understandable for any trader once he or she has grasped the basics and has had some practice trading using Fibonacci levels along with other secondary indicators that will help to improve the accuracy of the entry and exit point for every particular trade.

Free chapters of a forex day trading system can be downloaded at http://www.1-forex.com in case you are interested in learning more about Fibonacci forex trading.

Forex And The Anatomy Of An Elliot Wave

As you enter the world of Forex you will immediately feel the basic need all Forex traders have: A method or technique to forecast the market behavior with the highest possible accuracy.

There are a number of methods and techniques that traders have researched through the years with this goal in mind. These techniques are based on different indicators and approaches to trading, and each one has had its own successes and positive outcomes when applied to specific market conditions, but there is no doubt that among the most successful of these techniques you will find Elliot Waves as one of the best concepts and methods you can learn.

Ralph Nelson Elliot observed that the markets have strong trends that seem to follow a repetitive pattern in all the different time frames you can trade and after analyzing a great number of charts he discovered in the late 1920’s that the markets move in a repetitive manner far away from a totally chaotic behavior.

He divided market movements into trends, corrections and sideways movements. With these distinctions being made he then assigned a wave terminology to these periodic movements; he called the trend movement an Impulsive Wave and a correction a Corrective Wave.

In order to have the formation of an impulsive wave we need five constituent waves “inside” this wave. This will be three waves in the direction of the trend and two corrections against the trend.

But considering the fractal nature of the waves found by Elliot, then each of the smaller impulsive waves will have itself other five waves “inside”.

In the case of the corrective waves they will be formed by other three smaller waves. Two in the direction of the correction and one in the direction of the trend.

Considering the repetitive nature of Elliot Waves you can make a pretty accurate forecast of what the markets will do next, with the huge advantage this represents in your daily encounters with the currency markets.

Comments on Forex and Trade Intervals.

The Forex markets are open 24-hrs a day during most of the week, allowing forex traders a huge flexibility to enter their trades. And as long as the markets are open the prices will be constantly fluctuating as can be easily seen by looking at the forex charts. And it’s thanks to this fluctuations that traders can have profitable trades the whole day.

The charting software interprets the constantly changing prices by dividing this data into various time intervals. For each of these intervals the chart will show you the open and close price, along with the high and low price during the interval. Most software packages will allow you to see this price data by clicking on the spot of the chart where you want to check these values.

One very interesting feature of these forex charts is that they will allow you to choose the time interval under which you will be trading. You may look at charts with time intervals going from ticks, 1 min, 5 min, 10 min, 15 min, 30 min and 1 day.

What of these time intervals you use will depend mostly on the amount of time you want to spend monitoring your trade. For example if you want to monitor the trade for only a few hours you should use the 15 min charts. If you would like to enter a trade that will last for an entire day then you should better use the 30 min charts. And if you want to have a trade that stays open during days you should choose the 1 day charts.

Of course the lengths of the trades can vary, and the time interval you see is only a first approximation indicator of how long your trade will stay open.

One more issue with the length of the intervals is how much you will make, in average, per trade. The longer the interval the most profitable the trade will be compared with a short interval. But on the other hand shorter intervals allow for a greater number of trades that will compound and maybe surpass the profitability of the longer intervals.

An Introduction to Forex and Elliot Wave Degrees

As a Forex trader you will always be attempting to make more profits than losses from the fluctuations of exchange rates between currencies in the forex market; in short, this is what is called forex trading.

And if you want to become a profitable forex trader you will need a good technique to forecast the market behavior with time; i.e., how the currencies value will fluctuate in the next period of time you are interested on trading.

One of the best techniques you can use to forecast the Forex markets is by using the Elliot Wave Theory.

Ralph Nelson Elliot also observed that the market has strong trends that seem to follow a repetitive pattern in all the different time frames; and after analyzing a great number of charts he discovered in the late 1920’s that the markets move in a repetitive manner that is far away from being a totally chaotic behavior.

And this was not all Elliot discovered; he also realized that this patterns had a fractal nature. This means that the patterns not only repeated with time but that in a given period of time the characteristic wave pattern would repeat at different scales (days, hours, minutes).

This is the most basic concept in Elliot’s theory; i.e., the largest wave structures are composed of smaller sub waves, and these in turn are composed of even smaller sub waves, and in principle this goes on to infinity.

Elliot gave a name to these wave structures calling them “wave degrees”, depending on the time frame you are looking at. The range of these degrees goes from centuries to hours.

Elliot distinguished Nine Wave Degrees in his studies, they are known as:

- Grand Supercycle

- Supercycle

- Cycle

- Primary

- Intermediate

- Minor

- Minute

- Minuette

- Sub Minute

In principle these degrees can go to infinity and they clearly show you can choose the time frame you like better, according to your trading objectives, and the patterns you will see will be the same in any of these time frames.

Some Reasons Why You Should Trade Forex and Two Important Forex Concepts You Must Know.

These days everyone is talking about Forex trading and the great opportunity this activity represents for people willing to brake free from the corporate world and start working from home or any where else without losing their current lifestyle and even improving it.

Some of the great reasons why Forex trading is a great way of entering the capital markets is that is all 
commission-free and it has a low transaction cost. All the best forex brokers have these characteristics and
even Mini FX traders (i.e., traders starting with accounts having a capital as low as $250), who are just starting
in this field, can buy and sell currencies online always commission-free.

When trading the forex markets you don’t have to worry about fees you may have to pay to your broker;
there are also none of the usual fees to which futures and equity traders are accustomed to pay always;
no exchange or clearing fees, no NFA or SEC fees.

Over-the-counter currency trading involves a bid/ask spread and that’s how the brokers make money.
The good news is that the currency market is capable of offering you a round-the-clock
liquidity and this way you will receive tight, competitive spreads both in intra-day and night trades. 

Now, once you enter the world of forex trading you will need to learn about two very important concepts.
These are; “Pips” and “Buying and Selling Short”. Let’s talk about “Pips” first. Currency pairs prices are
considered always to go out to 4 significant digits. For example; if one currency pair is trading 
for 1.3451 then if the price increases to 1.3452, that would be a “one-pip” increase in the price of this particular
currency pair  This is an increase of one hundredth of a percent of the value of the currency pair you are trading 
at the moment. And depending the type of account  you are using, regular or mini, each pip will have a value 
of $10 or $1.So if you make 10 pips a day with a regular account you would have made $100 and
with a mini-account $10. 

The concept of “Buying” in Forex refers to the acquisition of a particular currency pair to open a trade and “Selling short” refers to the selling of a particular currency to open a trade, i.e, just the opposite. When you Buy, you are expecting the price of the currency pair to increase with time, i.e., you buy cheap to sell high; which is easy to understand. In the case of Selling short, it looks a bit more complicated. Here the way to make money is to initially sell a currency pair that you think will lose value in a given period of time and then, once it happened, you will buy it back at the new price but now you can sell it at the previous greater price the currency had when you opened the trade, so you earn the difference in prices. It may seem kind of tricky when you are starting, but once you are in front of your trading station it will look much simpler.

Fear And The Profitable Forex Trader.

Forex trading is one of the most looked for occupations for many people these days. Around the world people is getting tired of fixed working hours and tight cubicles that limit their aspirations of a more relaxed and satisfying working life.

In order to start Forex trading the new trader doesn’t need a fortune or good Wall Street contacts that will let him become part of the chosen ones. The only thing the new forex trader needs is some starting capital (as low as $100, but an amount around $5000 would be more recommendable) and the free forex trading platform that will be provided by the Forex broker.

But one thing is to start Forex trading and other very different is becoming a profitable Forex trader. In order to become a profitable trader the new trader will immediately discover the imperative need of having an accurate knowledge of the markets and a good understanding of the forex technical indicators. Concepts as Moving Averages, Fibonacci levels, Bollinger Bands, etc; are the basic knowledge every trader must have.

This basic knowledge is indeed essential but once in front of the trading station, with real money on the line and with an open trade subject to the currency markets oscillations; things will start to get tricky even if the basic technical concepts of forex trading have been understood by the beginning and sometimes also by the experienced trader.

Knowledge will start to fade in front of one of the most basic instincts we humans beings have. Fear will ask for an entrance to the traders mind and if let in by the inexperienced trader, it will turn the making of critical decisions difficult and many bad trading moves may follow.

It is very natural to be afraid and let fear invade us if we are not really sure of what we are doing or we can not afford to lose even a cent in a bad trade; or seen in a different approach, the trader is so anxious and perfectionist that he won’t let him lose anything and will take it very seriously if he loses a trade.

Fear is one of the worst enemies of the Forex trader. In order to become a profitable trader it is essential that the person involved in trading understands that he must leave fear aside and stick to the trading plan he has constructed and arranged before, always understanding that losing trades happen to everyone and they are always part of a profitable trading career. A forex trader must learn how to profitable use his stops without heavily compromising the capital in his trading account, i.e., he must play safe but realizing that a calculated risk must be undertaken in order to maximize profits.

In short, fear is a natural emotion we all humans have given the right environment is present; therefore it is the trader’s obligation not to arrange a “fear environment” around him and be psychologically prepared for the ups and downs of the trade. No one is prefect and that’s an even deeper truth in forex trading.