Leonardo Fibonacci was a mathematician who lived from about 1175 AD. He was well known in his day and contributed to the world of mathematics and his Fibonacci number sequence is used a lot in forex trading to increase profit potential - let’s look at it.

Fibonacci numbers

The Fibonacci number sequence first appeared as the solution to a problem in the Liber Abaci, a book written in 1202.The original problem in the Liber Abaci led to this question:

How many pairs of rabbits can be generated from a single pair, if each month each mature pair brings forth a new pair, which, from the second month, becomes productive?

The Fibonacci number Sequence set out to solve the question

The resulting Fibonacci numbers 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, are the result of the following equation. If Fn is the nth Fibonacci number, then successive terms are formed by addition of the previous two terms, as Fn+1 = Fn + Fn-1, F1 = 1, F2 =

The ratio of any number to the next larger number is 62%, which is a popular Fibonacci retracement number. The inverse of 62% is 38%, and this 38% is also used as is 0.500

Fibonacci Applied to Forex Trading

These numbers help to calculate "retracement levels" In currencies, by many traders.

The Fibonacci number sequence can be seen throughout nature and many traders believe that these retracements allow them to enter markets with good risk/reward – just as science orders the natural world, it must order the trading as well.

Making Money With Fibonacci

This is one of the dumbest trading indicators out and the fact is it’s been hijacked by the investment community, when it was really devised to solve a mathematical problem to do with the copulation of rabbits is ridiculous.

Fibonacci, if he were alive today, would probably laugh at the application of his theory in this way.

If you want to try using these retracements get ready to lose your equity.

If there is natural order in the world of trading they should work all the time and they don’t. Sure, you will see the levels hold on occasions but on more occasions you will see them break. The far out investment crowd love this mystical nonsense - but it’s a sure fire way to lose.

It has been made popular by vendors on the net, who see it as a good story to sell and it’s often found in tandem with Elliot wave.

Its promoters say will help predict prices with scientific accuracy – of course, this theory doesn’t work either and these vendors forget to tell you Elliot made no money with it and he devised the theory!

Think about it:

If there was a natural order to the market and you could predict with scientific accuracy, we would all know the answer in advance and there would be no market.

This is common sense, as a market price moves because of uncertainty and anyway, if anyone really had found the theory that predicted markets, they wouldn’t bother selling it to you - they would be making to much money!

A scientific theory by its nature should work all the time, if it doesn’t then its not scientific – period.

The problem Forex trading, is many traders are simply naive or lazy and want to believe these theories work, so they don’t have to put any effort into their trading – but life is simply not like that.

If You Want To Win Remember This!

If you want to make money you need to put in the effort.

Forex trading can make you a lot of money - but understand one important point about trading:

You are trading odds not certainties.

So leave theories like Fibonacci and Elliot Wave to the far out mystical trading community and concentrate on a logical system that trades the odds.

Keep in mind if you trade the odds correctly, you can make a lot of money.