2Bull Forex Blog

Leonardo Fibonacci was a brilliant thinker who lived in the 13th century and his Fibonacci number sequence is legendary and numerous traders use Fibonacci retracements to improve market timing, lets take a look at them in more detail.

Leonardo Fibonacci was born in Italy in 1202 and the Fibonacci number sequence was devised to solve a specific problem:

How many pairs of rabbits can be generated from one single pair, if each month each pair produces a new pair and from the second month the pair, starts producing more rabbits?

The result was a number sequence which solved the problem and is found throughout the natural world.
The equation is as follows:

If Fn is the nth Fibonacci number, then successive terms are formed by addition of the previous two terms, so that FN+1 = Fn + Fn-1, F1 = 1, F2 =

The ratio of any number to the next larger number is 62%, which is a popular Fibonacci retracement level. The inverse of 62% is 38%, etc

The two levels considered the most critical by traders are therefore: 38.2% and 62.8%. Other important numbers used in trading are: 75%, 50%, and 33%.

So does using these retracement levels to time market entry help in forex trading to increase profits?

Of course not, this has got to be one of the dumbest ways of trading there is and before I carry on, I am sure Fibonacci himself, would be horrified to see the way his theory has been hijacked to do something for which it was never intended.

Of course sometimes the levels hold - but pick any level you like at random and you will find that will hold to.

So why do traders believe this nonsense?

Well there are plenty of vendors selling trading systems around it as it makes a good story and it does make a good read - but stories don’t make money.

It’s also very often linked to another dumb theory Elliot Wave which is highly popular.

If you don’t know what Elliot Wave is briefly, it’s a theory that claims to be scientific and is nothing of the sort being totally subjective, again it’s a good story. However it would be interesting if Elliot were still alive today, to ask him why he made no money with his own theory, if he knew the scientific formula of market movement!

If you want to enjoy currency trading success, it’s not a good idea to place you trust in a number sequence which was developed to solve a problem to do with the copulation of Rabbits!

Here I am going to share with you a critical piece of forex education and it’s something you would be wise to study, as it will lead you to currency trading success - if you learn and digest it.

I am going to cover an experiment that took place in 1983 and the experiment was done to prove that anyone could quickly learn to trade and make big forex profits.

Richard Dennis was a legendary trader, who set out to prove anyone could learn to trade, if they had the right knowledge and attitude. He decided set about trading a group of people who had never traded before, to trade in just 14 days.

So what was the result of the experiment?

The group went on to make Dennis $100 million in just 4 years and become some of the most famous traders of all time.

This group was diverse: A female auditor, an actor, a security guard and a kid fresh from school were just a few of the people in the group - yet they all achieved success in 14 days!

So what can you learn from this experiment?

The first lesson is that anyone can become a successful trader, age, sex or educational achievement are no barrier anyone can do it.

Secondly it’s the speed with which they did it that struck me just 14 days and this shows that you only need to work smart not hard.

One of the most vital lessons you can learn is that the trading system taught was simple - but the vital thing Dennis knew was - if you have a trading system, you must have confidence to apply it, with discipline, otherwise you will fail.

The system was essentially a breakout system and the logic is timeless and the methodology will still work today - but takes incredible discipline to apply such a system and Dennis knew this.

So he rammed it home, that they would have take a long periods of losses to deal with, before they hit the big profitable trades and this is something you must learn to as part of your forex education.

Forex trading doesn’t just rely on your system it relies on your confidence in it and your ability to apply it with discipline, through losing periods. If you think discipline is an easy trait to acquire think again - its not, that’s why 95% of traders lose.

Of course you can do it but you need to do your homework and learn, understand and have confidence in what you are doing - it’s as simple as that.

If you want to read more about the turtle experiment, you should read Jack Shwagers excellent book Market Wizards and “The way of the turtle” where Curtis faith (the most successful of the group) outlines everything about the experiment.

These books won’t cost you much and they are really essential forex education, so go and get them. The turtle experiment inspired me to start trading many years ago and I have never regretted it and their success still inspires me today,

Finally, I hope they inspire you in your forex trading as well.