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Why does fibonachi work forex?

Fibonacci retracement is a technical analysis tool used to determine potential levels of support and resistance in the financial markets. This tool is based on the Fibonacci sequence, a mathematical series of numbers that occur naturally in various aspects of the natural world. When applied to forex trading, Fibonacci retracement levels can provide valuable insights into market trends and potential price movements.

The Fibonacci sequence is a series of numbers in which each number is the sum of the two preceding numbers, starting with 0 and 1. The sequence goes like this: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. This sequence is found in various aspects of the natural world, from the arrangement of leaves on a plant to the spiral of a seashell.

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When applied to forex trading, Fibonacci retracement uses these numbers to calculate potential levels of support and resistance. Traders use these levels to identify potential entry and exit points for trades. The most commonly used Fibonacci retracement levels are 23.6%, 38.2%, 50%, 61.8%, and 100%.

The 23.6% retracement level is the shallowest level and is often used as a stop-loss level. The 38.2% retracement level is a common level that often serves as a support or resistance level. The 50% retracement level is considered a key level and is often used as a potential entry point for trades. The 61.8% retracement level is another key level that often serves as a support or resistance level. The 100% retracement level is the deepest level and represents a complete retracement of the previous move.

The reason why Fibonacci retracement works in forex trading is that it reflects the natural ebb and flow of the markets. The financial markets are driven by supply and demand, and prices often move in waves. These waves can be seen as trends, with prices moving up and down in a series of peaks and valleys. Fibonacci retracement levels are based on these peaks and valleys and can provide valuable insights into potential levels of support and resistance.

Another reason why Fibonacci retracement works in forex trading is that it is widely used by traders around the world. This creates a self-fulfilling prophecy, as traders often use these levels as potential entry and exit points. As more traders use these levels, they become more significant, and prices are more likely to react at these levels.

In conclusion, Fibonacci retracement is a powerful tool for forex traders looking to identify potential levels of support and resistance. The tool is based on the natural ebb and flow of the markets and reflects the Fibonacci sequence, which occurs naturally in various aspects of the natural world. By using these levels, traders can identify potential entry and exit points for trades, and can take advantage of the self-fulfilling prophecy created by the widespread use of these levels by traders around the world.

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