All About Fibonacci Harmonic Patterns – Presentation #4

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As already stated in the earlier chapters, Harmonic patterns
trading is highly complex and advanced technical trading that is used for
forecasting the reversal in prices. These forecasts are carried out on the
basis of recognizing the patters formed on the chart and by using the Fibonacci
ratios. In this article, find out all about Fibonacci and how to use them along
with Fibonacci ratios.

The Fib Ratios and

Also known as the Fib ratio, the Fibonacci numbers and
ratios are essentially a number sequence wherein every number is derived after
adding the previous 2 numbers. Following is the Fibonacci number sequence: 1,1,2,3,5,8,13,21,34,55,89,144,233,317,610
and so on.

On the other hand, the important Fibonacci ratios are
calculated through square roots, squaring as well as reciprocation of the real
Fib numbers. Following are the important Fib trading ratios: 0.382, 0, .618, 0.786,
1.0, 1, 1, 2.0, 2.62, 3.62 and 4.62. Apart from this, the secondary Fib ratios
include: 0.236, 0, 0886, 1.13, 2.236, 3.14 and 4.236.

The Fibonacci numbers and ratios can be applied in various
ways for advanced technical trading and analysis. Some common applications are
Fibonacci projections, retracements, fans, arcs, price, time zones and price
among other others. Almost every trading software offer tools for drawing
Fibonacci levels. These reflect Fibonacci retracements, extensions as well as
projections. Apart from this, the Fibonacci numbers are applied to both price
and time, which allows traders to trade successfully.

Final Words

When it comes to using the Fibonacci ratios as well as
numbers along with Harmonic patterns, it is important that traders look for
patterns in the longer timeframes. It is also advisable that traders make a
note of the trades approaching the Potential Reversal Zone or PRZ level.
Traders can then resort to auto alerts and trade manually. Also, if the traders
are unable to keep a track of the price movements on a constant basis, then they
can consider inserting pending trade orders which will get automatically
activated when the price movement matches specific criteria. Lastly, traders
can review the previous trades pertaining to the assets that they are looking
to trade. This would help them in understanding how price movement confirmed
reversals previously.

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