Introduction to Fibonacci Retracement

The Fibonnaci retracement is a technique being used by numerous professional brokers all over the world, and billions of dollars worth of trade are profited each year by using the said trading technique.

But first of all, what is Fibonacci Retracement? The Fibonacci Retracement is a term used in technical analysis to determine the support (price stops declining) and resistance (price stops rising) levels. It is the potential retracement of the original movement in the price of a financial asset. Horizontal lines are being used to point out the levels of support and resistance at the key Fibonacci levels before the price continues in its original direction.

It is named after the famous mathematician, Leonardo Fibonacci, who discovered the series of interconnected numbers in the 13th century.

The original sequence of Fibonacci numbers is 0, 1, 1, 2, 3,5, 8, 13, 21, 34, 55, 89, 144 and so on, wherein each number on the right side is the sum of the two preceding numbers on the left side.

The key Fibonacci ratios being used in technical analysis are 23.6%, 38.2% and 61.8%.

The 61.8% ratio, also called the “golden ratio”, is calculated by dividing one number to the number on its right side. It doesn’t matter which number you choose, the answer would always be close to 61.8%.

For example: 13 divided by 21 = 0.619, and 55 divided by 89 = 0.6179.

The 38.2% ratio is calculated by dividing a number to the number two places to its right. Likewise, regardless which number you choose, the answer would always be close to 38.2%.

For example: 55 divided by 144 = 0.3819, and 13 divided by 34 = 0.3823.

Lastly, the 23.6% ratio is calculated by dividing a number to the number three places to its right. Just like the first two ratios, no matter which number you choose, the result would always be close to 23.6%.

For example: 8 divided by 34 = 0.2352, and 21 divided by 89 = 0.2359.

The Fibonnaci retracement is being used by numerous professional brokers all over the world, and billions of dollars worth of trade are profited each year by using the said trading technique.

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Understanding Technical Analysis

If you are new to online trading, you might come across a lot of terms that you are unfamiliar with. Fortunately, you’ve found our blog. We’re hoping that our rich source of educational articles will help you with your online trading experience.

First of all, what is technical analysis? Technical analysis is the method of evaluating securities to predict the direction of prices through the use of past market data such as price and volume.

Technical analysts do not rely on a security’s intrinsic value, but instead use charts and other tools to determine patterns that can indicate future activity.

Difference Of Technical Analysis and Fundamental Analysis

Unlike the fundamental analysis, technical analysis doesn’t attempt to measure the security’s intrinsic value, and instead relies on the historical performance of the market to forecast future movement.

Let’s put it this way. In a shopping mall, the fundamental analyst would visit each store, examine the product that’s being sold, and afterwards decide whether to buy it or not. In comparison, the technical analyst would go to the mall to observe and watch people visit into the stores. The technical analyst’s decision would depend upon the patterns or activity of the people going into each store, regardless of the product’s intrinsic value.

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Choosing the Best Forex Broker

Before getting into Forex trading, one of the first things that you should do is to carefully choose your forex broker. Your broker will be a vital part of your success in online trading, so it is critical to cautiously pick the best one.

In choosing the best forex broker, there are a lot of things that you should take into consideration. It is important to pay attention to these things as your relationship with your broker would play a big role in your online trading experience.

To choose the best forex broker, you must first make sure that the broker that you will be working with is trustworthy. If you think that money is the most important currency in trading, then you’re missing the point. Trust is very important in trading, so you must carefully check the broker’s background so you could properly place your confidence in your broker.

Also, you should monitor the pips, spreads, leverage, and other benefits that your broker is offering. This one is very important, as it will greatly affect your trading cost, opportunity, and chances of making a huge profit.

Your broker’s reliability can also be measured by the amount of positive feedbacks that other traders give them. In choosing the best forex broker, you must properly do an extensive research about the broker so that you will be sure that it is a reliable one. By visiting forex review websites such as WibestBroker, you will be able to read the feedbacks of real traders, which will greatly help you decide if the broker is reliable and trustworthy or not.

For a more comprehensive and detailed explanation of how to carefully choose your forex broker, you could refer to this webpage:

http://wibestbroker.com/brokers-review/forex-brokers/bestbroker.aspx

In WibestBroker, our ultimate goal is to provide traders with a trading community that’s free from scams, frauds and other illegal practices. That is why we’re here, to provide authentic and unbiased reviews of the most popular and top-rated brokers. Visit WibestBroker and see who the best forex brokers are! 🙂

Familiarizing Yourself With Leverage

If you are a trader — or an aspiring one, you might have come across this term a countless times already. However, do you truly understand what leverage is?

Leverage is used to amplify a trader’s market capital so that they will be able to control bigger market positions that exceeds their initial investment.

Does it still sound so confusing?

Okay, so let’s put it this way.

For example, a trader invested an amount of \$500 in his trading account. Such an amount would not be sufficient to buy 1 lot of EUR/USD pair, which costs around \$100,000. Logically speaking, looking how small your initial investment is, it might seem impossible for you to buy a “lot” of EUR/USD. But in the vast world of forex trading, that’s a different story.

Most forex brokers nowadays allow you to benefit from a high leverage ratio. Commonly, most forex companies provide their clients with a leverage ratio of up to 1:400. A leverage of that amount would be equivalent to a value 400 times your initial capital. It looks like basic mathematics, right? Yes, it is. Say for example, you have \$1 of initial capital in your account, and with a 1:400 leverage, that would be \$100 x 400 = \$400 worth of capital.

With such a high leverage ratio, having a \$500 initial investment would be sufficient to buy not just one, but two lots of EUR/USD! That’s like putting your capital on steroids. It sounds so amazing, right? Of course, because it is!

However, despite all the advantages leverage has to offer, it also carries a substantial amount of risk. Leveraging your capital will magnify not just your profits, but also your losses. Trading in forex involves a high level of risk, but with proper knowledge and understanding of the market, these risks can be reduced considerably.

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There’s a reason why the Forex market often comes to mind whenever there’s a discussion about the different kinds of possible investment types. Foreign exchange market, forex market, or simply forex, is a market that deals with trading of different currencies. The forex market has numerous advantages compared to other types of trading. Unlike the stock and commodity markets,  the Forex market is an over-the-counter market, which means it is open 24 hours a day. Also, unlike other forms of investment, the forex market doesn’t require a considerable amount of money to start trading.

To trade in Forex, you only need a small amount of capital. As little as \$1 is already enough to trade with a “micro account”, of which will allow you to open positions of 1,000 units. One lot of 1,000 units of currency represent 1 contract in micro account. Each “pip” or “tick” is worth \$0.10 profit or loss, depending if you’re going with or against the market. There is also a forex mini account, which allows the trader to control up to 10,000 units of currency, and a standard account, which allows you to trade contract sizes of 100,000 units. However, in these types of accounts, each pip is more expensive. One pip in a mini account is worth \$1, while a pip in a standard account is worth \$10.

Aside from that, the Forex market  is one of the most liquid markets, wherein daily activity usually exceeds US\$4 trillion per day. Trading in the spot Forex markets gives you full control of your investment, which means you can buy and sell your positions at any moment during the open market period. It’s a very useful advantage because, you can immediately withdraw your account money whenever you need it without any additional fees or long waiting time. Some other forms of investment are not as convenient, even requiring to hold your money up for an extended period of time.

Another advantage forex market has over other investment types is the possibility to control bigger market positions with a small amount of money, through the use of leverage. Leverage allows the trader to amplify their capital. For example, in a leverage of 1:150, the trader would be able to control positions 150x the amount of his capital.

Forex traders can make profit in both bear and bull markets. Trading in the forex market is considered risky, but by following a good trading system, good money management skills, and the right amount of self-discipline, the risks would be significantly reduced.