Fibonacci calculator for forex trading is a forex trading tool used to calculate the potential support (the lowest level the forex market gets to before it starts to move up) and resistance (the highest point a forex market gets to before it starts to go down) retracement level in a trend.
There are quite a handful of tools that can be used in the forex market and there are different conditions under which they apply best. In essence, you do not just pick up and apply any forex tool because you feel like. You have to first of all take a look at the condition surrounding the trade before applying any of the forex trading tools. Take Fibonacci tool for instance, it works best when the market is trending on either direction. Fibonacci retracement is used to identify strategic places that is best for transaction to be placed. The basic idea in the use of Fibonacci tool is to go long on a retracement when the market is trending up, and to go short on a retracement when the market is trending down. Anything outside this will not work well with the Fibonacci tool.
To apply the Fibonacci tool, you have to find the retracement levels. The fibonacci retracement levels are the extreme points of a market movement towards the upward or the downward direction as displayed in a chart. To find the retracement levels, you have to find the latest notable support and resistance and then take it from there.
THE BENEFITS OF A FIBONACCI TRADING TOOL IN FOREX TRADING
Fibonacci trading tool is used by traders to help them detect market timing and trade management. This timing helps them to know when is best to enter a trade or exit a trade; it is all about timing.
It also provides a key horizontal price levels which usually bring higher greater volumes or levels that can set up a promising trade.
Being that this analysis is viewed in a graph, it gives a general view of the market levels. From its view as a chart, it gives a certain picture that can be of benefit to a trader.
Do not forget that the fibonacci trading tool works well when the market is trending either in the upward direction or in the downward direction. If the market is not trending, it is wise to use other befitting tools to detect when to enter a market or when to exit a market.