### A little bit of history – do you know who Fibonacci was?

? I know, all of those European surnames may not make a lot of sense if any at all, so I will just cut to the chase right away – Fibonacci was an Italian mathematician who left tons of work behind, a lot of which is still being used today in several areas. Like, trading for example.

Fibonacci’s most important discovery was that of a series of numbers that can used to explain and describe natural proportions of different matters.

Theory of Fibonacci is as follows: the series of numbers starts with 0 and a 1, the next number is the sum of the two previous numbers, so it goes 0, 1, 1, 2, 3, 5, 8, 13, 21 and so on.

The ratios are still used today under the name of a ‘golden mean’. You must have seen the pictures of extremely beautiful people, whose faces were being measured by the Fibonacci’s number.

Theory of Fibonacci is as follows: the series of numbers starts with 0 and a 1, the next number is the sum of the two previous numbers, so it goes 0, 1, 1, 2, 3, 5, 8, 13, 21 and so on.

But what does all of this have to do with trading? Well, among numerous studies there were two which are of interest to us today: RETRACEMENT and EXTENSION levels.

FIBONACCI EXTENSION LEVELS

0, 0.382, 0.618, 1.000, 1.382, 1.618

FIBONACCI RETRACEMENT LEVELS

0.236, 0.382, 0.500, 0.618, 0.764.

But do not worry here. You are not going to need to remember complicated formulas in order to calculate all of these numbers. That Is simply too much work and the time spent on the calculation is not the time we can allow ourselves to lose in the span of one trade. Usually, your Fibonacci calculators are already built into your trading software and your platform can count everything for you.

Fibonacci retracement levels are usually used by traders as resistance and support levels. And usually, due to a wide-spread of the calculation use along with the accuracy of the calculations, the support and resistance levels are fulfilled with only little percentage of losses.

In order to successfully apply Fibonacci calculations towards your trade you are to identify SWING HIGH and SWING LOW points.

A SWING HIGH is a candlestick in the chart containing at least two lower highs on both the left and right of itself.

A SWING LOW is a candlestick in the chart containing at least two higher lows on both the left and right of itself.

I understand that all of that may seem too difficult, but such is a trading business – sometimes you have to dive into the difficult stuff in order to have easy wins.

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