Inside Trade | Fibonacci

In the year 1202, a book entitled Liber Abaci was published by a celebrated mathematician of the middle ages – Leonardo Pisano Bigollo. The book, which may be translated as  “Book of Calculation,”  introduced the Hindu-Arabic numerical system to the western civilization and within that is the Fibonacci number theory.

Fibonacci number is a number sequence which includes 0,1,2,3,5,8,13,21, 34,55,89,144,... and so on and so forth. It is calculated by adding 1 to the first two number which is 0 and 1. After coming up with  the first two numbers, the next number will be a sum of the present and the previous number.

This number is specially exceptional because the numbers are connected by means of a constant relation, particularly their ratio. Every number belonging to the sequence are connected through the golden ratio (0.618 or 1.618).  The golden ratio may be found on almost every corner of the world and in almost any organism, even the human body has this number.

Fibonacci numbers are applied in the financial markets on various ways. But in Forex trading, it is used in determining the Support and Resistance levels. After forecasting the support and resistance level, an attainable target profit and unconstrained stop-loss level may be set by the trader.