We traders use Fibonacci ratios and tools a lot in our trading, so if you are not familiar with it, we suggest you follow this article and the following articles about combining Fibonacci with trend lines and support and resistance lines. Fibonacci is a very broad topic, and there have been many different studies with weird names in it, but we want to look at two of them: Fibonacci Extension and Expansion. Let us first introduce you to Mr. Leonardo himself!

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No, Leonardo is not a famous chef, but he was a famous Italian mathematician who was also known as a very smart genius. When he discovered the simple series of numbers that formed ratios (which explained the natural properties of objects in the universe), I shouted!

Ratios are created from this set of numbers: 0,1,1,3,3,5,5,8,13,21,34,55,589 and…. This series of numbers starts with zero and continues with 1. Then each number is created by adding its previous numbers. After the first few numbers, if you measure the ratio of each of these numbers to its higher front number, it would be 0.618. For example, 34 divided by 55 equals 0.618. If you consider the ratio of two numbers as one in between, it would be 0.382. For example, 34 divided by 89 is equal to 0.382, and the further we go, the more proportions we get.

• These ratios are called “golden ratios”. Well, incomprehensible words are enough. Let’s go to the main point. The following numbers are the values ​​we need to trade:
• Fibonacci Extension Ratios: 0.236 – 0.382 – 0.50 – 0.618 – 0.764
• Fibonacci Expansion Ratios: 0.382 – 0.618 – 1 – 1.382 – 1.618 – 2.173

Of course, you do not have to draw these items on your chart every time you analyze them, you just need to use the Fibo tool in your MetaTrader so that this platform can easily do the calculations for you in a fraction of a second.

How to trade with Fibonacci ratios?

Traders often use these levels as areas of support and resistance. Since many traders see these same levels and place their buy and sell orders based on them to enter the trade or end their trading, the levels of support and resistance of the Fibonacci level are necessary to do This creates.

Traders usually use fibo extension ratios to enter the trade and fibo expansion ratios to exit the trade.

Price return points in Fibonacci

The first thing you need to know about the Fibonacci tool is that it works best when the market is trending. The idea is to buy when the market is on the upside, buy again on the Fibonacci support level, and when the market is on the downside, sell again on the Fibonacci resistance level.

To find these re-tracking levels, we have to find the recent significant high and low fluctuations. Then click on the Fibonacci indicator for downward trends and then hold the mouse on the highest point and drag it to the end of the lowest point and release.

Do the opposite for upward trends. Click on the Fibonacci pointer and place the mouse pointer on the lowest point and drag it to the end of the dot and release. For example, look at the image below, which is taken from the daily chart of the Australian dollar / US dollar.

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