Using A Fibonacci Trading Growth System
Many investors in the stock market have spent countless hours looking at trends to see whether or not a common theme can be found in trading. Since trading is often about betting on trends, or following the trend of the market as a whole, investors reason that if they can find themes that happen regularly, they can limit their risk. This is a controversial tactic, and not all in the financial world agree that these trends exist. Fibonacci trading is one of the many types of trend or theme trading systems that exist. It is a system based on the Fibonacci numbers, which was created by an Italian mathematician during the 1200's.
Fibonacci reasoned that there were divine numbers to the world, and that the pattern could be found in nature, math, and science in general. These numbers create a pattern that was formed to make a percentage that is the value of 1.618. This formula can be applied to the measurements of various forms in nature such as the seashell, the human body, and other biological entities. This math applies to investors in the sense that this ratio can be used to determine market trends. Fibonacci trading is used generally to follow these trends based on the ratios. This is generally done through retracements. Retracements are a theme that occurs after a strong market move. Many in Fibonacci trading trade only on retracements. They use software to determine if the move is in line with the market or not, and then when the numbers are in the right place, they invest until the trend has matured. These retracements occur over and over again, and it is much easier to find these rather than finding the initial strong movement. Fibonacci trading is not pure science, and it is important to note that risk is not eliminated in this style of investing. It may seem to be much more intuitive than the often Vegas-style day trading schemes, but risk still exists. Most brokers that are in Fibonacci Trading will tell you that there still needs to be a high level of education in the market before taking your portfolio and thrusting it into a software tool. However, Fibonacci trading is still a proven way to help grow your investments in all kinds of markets. |
