A Fibonacci calculator is tool used by forex traders to place stop loss in other to lose less money in their investments, to enter and exit trades, to forecast currency and market movements, to tell when it is the right or wrong tome to trade and to increase and maximize profit or returns.

Fibonacci calculators is also used by technical traders to identify strategic places for transactions, stop losses or target prices. It helps forex traders get in a good price. After a significant up and down movement in price, the calculator shows the new support and resistance levels of each trade.

Unlike other moving averages, the Fibonacci retracement levels have static prices in that they do not change. This point allows traders to react when stock and currency price levels are tested by a quick and simple identification of the chart pattern. The forex traders will now expect a break or a rejection in the price action since the levels are inflated points.

FORMULAS USED IN THE CALCULATION OF FIBONACCI NUMBERS

They are majorly two different methods used in the calculation of Fibonacci numbers or sequence. These two methods are the Linear Recursion formula and the Binet’s formula.

BINET’S FORMULA

TheBinet’s formula is an explicit Fibonacci formula used to find the nth term of the Fibonacci sequence. It got its name because of the fact that it was driven mathematically by mathematical Jacques Philippe Marie Binet even if he was already known to be Abraham de Moivre. The Binet’s formula is represented by

If Fn is the nth term of the Fibonacci number, then

Fn =1/√5 ((1+√5/2) n-(1-√5/2) n)

For example, 1/1=1, 2/1=2, 3/2=1.5…34/21=1.617, 55/34=1.618 etc. This means that when experimenting with larger numbers, it is seen that the quotient of consecutive terms or numbers of sequence will approach 1.618. This sequence looks like that of a geometric equation.

LINEAR RECURSION FORMULA

In linear recursion formula, the nth term is gotten by the addition of two numbers before it. It is a sequence of integers in which the first and second number are both equal to one and each preceding number is the sum of the two before it. The Fibonacci sequence starts with a 0 and 1 which goes like this; 0, 1, (0+1=2), (1+2=3), (2+3=5), (3+5=8), (5+8=13), (8+13=21), (13+21=34), (21+34=55), (34+55=89)etc.

This formula can also be called the table formula

 1st 1 2nd 1 3rd 2 4th 3 5th 5etc.

Using the table pattern as a formula for findingFibonacci numbers is not a closed formula because one cannot use it for the calculation of any given number or term in the sequence without calculating all the previous numbers before it.

In conclusion, these Fibonacci Calculator Formulas have great outcomes in finding a sequence pattern in Fibonacci which actually tells forex traders the different levels of retracements which are set as default settings for most forex charting software.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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