The Most Powerful Indicator

Around the year 1170 Leonardo Fibonacci da Pisa was born, son of a merchant and city official. Leonardo Fibonacci became prominent mathematician, and has been credited with the discovery of what we known now as the Fibonacci series.

After Leonardo Fibonacci's trip to Egypt he decided to publish his famous "Liber Abacci", or "Book of Calculation". Among other things, Leonardo Fibonacci came up with sequences of numbers.

By far, Fibonacci is the most powerful indicator tool used for analysis. Fibonacci analysis is widely known, and used by many traders, to calculate possible targets for their entry and exit points, and also in identifying potential levels of resistance and support.

The idea behind the Fibonacci series suggests that the price of whatever market currency you are observing will always retrace a specific percentage of a previous move and will then find resistance or support at the main levels of Fibonacci, before proceeding in its original direction.

Fibonacci is known to be a leading indicator that is not lagging - or, in other words, Fibonacci has predictive powers, not like other technical indicators that are usually informative in trend changes. After changes occur, Fibonacci's level of retracement will show you other possible turning points, before these changes actually occur.

Ordinarily, this elemental charting system will do it for you. You may have heard the name William D. Gann, a famous trader who has implemented the Fibonacci level in all his trading transactions. Gann mentions Fibonacci throughout his courses and books. In every level he never fails to talk about the importance of 50% retracement level.

Many traders today use the same principal, in the Forex market, as those that Gann had applied before in his trading.

Maybe you will be confused on how you can make use of the Fibonacci level when trading in Forex today. It is true that it is difficult to identify which point of the Fibonacci level prices will be retraced. This is the reason why the Forex trading system, that are often used in Fibonacci, was also meant to incorporate the use of other signals or price movements.

Alternatively, you can detect a candlestick reversal pattern happening at a key Fibonacci retracement level.

The same thing goes with pivot points; Fibonacci levels can act as helpful guidelines in identifying possible reversal points. Nevertheless, always bear in mind that this is plainly a tool, and shouldn't be considered alone as your sole strategy.

By simply combining the power of Fibonacci levels, with other technical tools, you should, at least, be able to improve your Forex trading system, as well as adding confidence in making the trade.

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