Fibonacci and Trading

The fibonacci trading and gann trading has become one of most popular tool in making technical analysis for traders involved in stock trading, swing trading, options trading and all other kinds of trading systems. Every trader need to understand how to make use of the retracement levels in analyzing the market. Seasoned traders know that combining it with other strategies such as candlestick patterns, moving averages and other methods will help them attain a more accurate picture of the market. Traders who believe that the futures and options markets follow a pattern that can accurately be calculated can make use of the Fibonacci retracement levels.

There are lots of day traders as well as swing traders and other types of investors who trade based on the natural cycles that the financial markets follow. There are several retracement levels that are considered as very important points however, the two most important ones are at levels 38.2% and at 62.8%. Traders can make use of other retracement points such as at 33%, at 50% and at 75%. These points can help traders in identifying where to put their stop loss orders for example. Stop losses can be determined ahead of time so that when the trades are going against the support zone, the traders will be able to protect their position by exiting or by closing it.

Aside from being able to define the exit points, traders can also determine the position sizes. Fibonacci and gann software may have more positions if the prices are within specified levels. The retracements levels can also be used to lock in the possible profits that can be made in every trade. Traders are also able to control their emotions if they are able to determine not only their stop loss points but also if they are able to determine profit objective too. Traders who are not able to take out the emotion from their trading can suffer more losses in the process.

Traders though may be challenged in learning how they can actually apply multiple time frames that t they have created with the various pivot points. Most often than not, they are not able to make sense of their charts and make any good trading decision out of it. Fibonacci and gann may be able to use the tool when they are creating a single time frame with about 1-2 pivot points only. While they are able to interpret this simple chart, it does not provide reliable data. The best solution that traders have today is for them to make use of software programs that will provide them with accurate data even with multiple time frames and pivot points. The graphical presentation of the data is easier to understand and this will allow the traders to make the right trading decisions.

Article Source: Fibonacci and Trading