Where have you heard about the Fibonacci sequence? Dan Brown’s controversial book contained a reference to it. Besides that, you would probably have heard about the importance of Fibonacci sequence at any forex trading seminar or forex trading tutorial.

All those who are learning forex trading often wonder what role could such an exotic mathematical sequence have in something as practical oriented as forex trading.

Those who often wonder “What is forex trading?” often use the involvement of this complex concept to convince themselves that there is no easy answer to the question. Well, there is a correlation between the movement of the market and the ratios of the number that form a part of the Fibonacci sequence.

If you use the ratios of the Fibonacci numbers, you can identify where there will be resistance or support for the market. This explanation often sets off a mini celebration in forex trading seminars and forex trading tutorials. Those who are learning forex trading feel they have been given the map to the pot of gold lying at the end of the rainbow.

However, there is a catch. Each Fibonacci number can have a ratio with another Fibonacci number. There are many numbers in this sequence. Unless you apply the right ratio, there is no way you can anticipate how the market will move. This often brings back the forex traders back on earth. If you choose the wrong ratio, you may end up losing all your money. How can you make sure that you get this part of forex trading right?

Forex traders should make use of forex trading simulators to practice getting the ratios right. A few ratios like.236 and.618 are very popular. The market often meets support or resistance at these ratios. You can try and try again until you feel reasonably confident about forex trading and the role of Fibonacci ratios in understanding what is forex trading. The more you practice in forex trading simulators, lower will be your chances of getting it completely wrong.

Picture source: ultimateforextradingsystems.com