Fibonacci numbers, also referred to as the Fibonacci sequence, have been observed for hundreds of years by statisticians the world over. First quantified in the early 13th century by mathematician Leonardo Pisano, Fibonacci numbers are utilised in everything from architecture to weather forecasting. They are a mainstay of forex technical analysis as well, and they're readily applied to the markets on a daily basis.
Past Performance: Past Performance is not an indicator of future results.
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The Fibonacci sequence features relative simplicity, yet advanced serviceability. The basic progression is as follows: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, on to infinity. Each number in the sequence is the sum of the previous two integers, thus creating a unique proportionality. This ongoing relationship between the values is represented in statistics as the Greek letter Phi (φ), known as the golden ratio (1.1618034).
Of the many aspects local to the sequence, the golden ratio is coveted by technical traders. It plays an elemental role in the calculation of indicators such as Fibonacci retracements and extensions. Taking advantage of the Fibonacci calculator is a great way to quickly and routinely maximise the utility of these powerful trading tools.
Advanced Analytics: The Fibonacci Calculator
In the arena of active trading, Fibonacci retracements/extensions are popular among forex market participants. An inherent flexibility ensures that they're readily applied to nearly any strategy, specifically trends and reversals. Trade management is another area where Fibonacci retracements/extensions excel by helping with the placement of stop losses and profit targets.
Fibonacci retracements/extensions are especially useful in trend identification. They are frequently referenced by traders to determine the validity, size and potential exhaustion points of a prevailing trend. That is the beauty of the Fibonacci calculator―it takes the work out of applying retracements/extensions to any trend, bullish or bearish. All one needs is a designated high, low, and custom pullback value, and the Fibonacci calculator does the rest.
Assume that the EUR/USD is in the midst of a strong intraday uptrend, with a defined high (1.1459), low (1.1316) and custom (1.1385) value. Given only those price points as reference, the Fibonacci calculator automatically produces an entire array of distinct levels:
|High (b): 1.1459||23.6%||1.1425||200%||1.1671|
|Low (a): 1.1316||38.2%||1.1404||161.8%||1.1616|
|Custom (c): 1.1385||50%||1.1387||138.2%||1.1583|
|High (a): 1.1459||100% (a)||1.1459||38.2%||1.1330|
|Low (b): 1.1316||76.4%||1.1425||50%||1.1314|
|Custom (c): 1.1385||61.8%||1.1404||61.8%||1.1297|
Computing retracements and extensions by hand is a challenging task to complete successfully in a live market environment. Not to worry, though, because the Fibonacci calculator rapidly and precisely generates the desired levels regardless of currency pair, volatility or trend direction.
Senior Market Specialist
Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation…