2Bull Forex Blog

Forex trading is one of the most popular forms of solid investment nowadays. While you can earn big money by engaging in the Forex market, you can, in the same way, lose huge sums of money if you’re not careful. One way to ensure your success is to do your homework and understand all concepts that the industry uses, one of which is the plotting of support and resistance.

When you look at the upper and bottom borders found in trade channels, you’ll see what are officially called the support and resistance lines. The resistance lines are the peaks representing the price levels wherein the selling pressure moves to exceed the buying pressure. The support lines, on the other hand, are the troughs representing the price levels wherein the selling pressure fails to exceed and in fact gives in to the buying pressure. One of the tricks in earning significant money from Forex trading is plotting support and resistance in order to check warning signals and make the necessary changes in trend lines.

Trend lines promote the real importance of support and resistance. Trends uphold time and volume; the trend becomes more significant when the prices remain bouncing off the support and resistance levels for longer periods of time. Once a firm support level is penetrated on heavy volume, it enjoys a higher probability of turning into a firm resistance level as well. The converse of this is also true. Thus, by having a firm grip of the support and resistance levels, a trader engaged in Forex trading can make an informed decision to either close or save his or her current position according to the signals shown in the trade channels.

Who knew that a modest illustration of an Italian mathematician from centuries ago would soon become a moving force in the vastest market of modern times? Leonardo Fibonacci, also known as Leonardo Pisano, experienced a stroke of genius as he tried out several number sequences and tried out (or used as examples, to be precise) what are now known as the Fibonacci numbers in Liber Abaci, his groundbreaking book. The book introduced the Arabic numerals and the Fibonacci numbers, long used by Indian mathematicians, to the Western world, earning Fibonacci a place in history. He is presently regarded as arguable the most talented of all the mathematicians from the Dark Ages.

The Fibonacci numbers, which Fibonacci simply introduced through a problem involving rabbits, play an important role in Forex trading, one of the most popular choices in investments these days. According to the system used by the said sequence, each number after the first two numbers it follows is, in fact, the sum of the preceding two numbers. This is why the Fibonacci number sequence begins this way: 1, 1, 2, 3, 5, 8, 13, 21, and so on. But what does this mean, or how does this apply in the Forex market?

It is no hidden secret that the Forex market is always on the move. It goes up and down according to changes in economics. Thus, engaging in Forex trading amounts to hard work as far as maintaining a profitable position is concerned. A Forex trader has to use all his or her faculties to spot alarm signals and make the necessary trend lines to protect his or her investments. The Fibonacci number sequence helps a Forex trader become more attuned to possible abrupt changes by anticipating the results of a particular movement cycle. Through the use and understanding of the Fibonacci numbers, a trader engaged in Forex trading can, at the same time, minimize his or her risks and maximize his or her profit yield.