Need A Little ‘Divine’ Trading Insight?
2020-05-08 | Simpler Trading Team
When things get tough in a volatile market, too often traders attempt to rely on “divine” intervention to save a failing trade.
What traders tend to overlook is they could have started with a higher power of analysis.
“The Divine Proportion” is another name for Fibonacci numbers and ratios, which are found in every aspect of the physical world.
Fibonacci simply means a series of numbers, starting with zero and one, where the next number is created by adding the two previous numbers. For example, 0 + 1 = 1, 1 + 1 = 2, 2 + 1 = 3, etc., until infinity. This methodical series of numbers creates a constant ratio within the Fibonacci sequence, primarily 1.618.
And this is the connection to trading.
Fibonacci ratios are applied to technical analysis to formulate a methodical way to analyze charts. Fibonacci analysis can be used by any type of trader — swing trader, day trader, scalper — and in any market. Fibonacci tools are useful for analyzing stocks, options, equities, futures, forex, and even crypto.
Instead of a last-ditch hope through “divine” intervention, traders can learn to use Fibonacci ratios to target potential setups.
Is it an easy analysis to learn? Well, is anything in trading “easy?”
Traders can apply the basics of Fibonacci and then begin advancing their skills to develop an edge in the market.
You’ll hear terms such as Fibonacci Retracements, Fibonacci Extensions, and Fibonacci Projections. These describe relationships to price that are used to find trade setups. Each price relationship sets up potential support or resistance in a chart. The goal is to put it all together to identify trade setups.
One of the “powers” of Fibonacci is that the ratios adjust to fit new data as time and price change within a chart. And because of how accurate and effective Fibonacci is within trading, it’s possible to use this tool regardless of market trend direction.
What is most important here is that applying these ratios can help identify key support and resistance zones in the market, and therefore determine key trading opportunities or setups.
Fibonacci encourages discipline to follow a precise approach that anyone can learn.
This tool works for veteran traders who want to improve their trading discipline, or new traders starting from scratch and looking for a proven trading strategy.
Learn to target precise entries and exits with “divine” tools — take a look at chart analysis.