Fibonacci,was an Italian mathematician.He has a number sequence named after him which is known as the Fibonacci numbers.In the Fibonacci sequence of numbers,each number is the sum of the previous two numbers,starting with 0 and 1. Thus the sequence begins 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377,610 etc.That is,after two starting values,each number is the sum of the two preceding numbers.

The higher up in the sequence,the closer two consecutive “Fibonacci numbers” of the sequence which are divided by each other will approach to the golden ratio.When this ratio is applied to the trading stocks,it produces two results as primary and secondary.The primary result refers to moving in one direction while the secondary in the opposite direction.

The retracement levels of the most common Fibonacci numbers in the primary trend are 38.2%,50%,61.8%. The most basic stock charting applications use these standard levels. When once the counter trend rally takes place the retracement levels of Fibonacci behaves as magnets. Excluding these levels there are other levels which provide resistance and those levels are 75%, 78.6%, 87.5%, and 88.7%.

The thumb rule states that the retracement levels makes about 50%, and the earlier mentioned levels attracts the price by behaving like magnets. The price must be analyzed by the persons who are familiar on those levels. Always the prices do not move in constant. Stocks, futures, forex,all instruments which are liquid,will often oscilate in Fibonacci proportions.

Fibonacci ratios may be applied to the Price scale,and also to the time scale of charts.Many traders use Fibonacci ratios with a few simple indicators that can help them to determine probable price turning points,optimum entry,exit and stop-loss levels.

After identifying the primary trend, use price reversal pattern recognition to coincide with a fibonacci retracement level to confirm that the countertrend move has ceased.Then look for the stock to test the recent lows and double bottom or break through that level.

The trader must have the clear idea and knowledge of the international markets because of the “risk arbitrage” in the existing market situations mainly in “forex trading”. For help “forex signal trading” can be used by the trader. While performing “forex rading” the transaction of currency between nations take place, so the trader must be aware of that.

This application of Fibonacci to trading can be very complex for a new beginner and does take time and experience to perfect it.Many floor traders use these Fibonacci retracement levels. These levels are used by many advanced traders as well,it allows them to become a self-fulfilling prophecy.