What if there was a way to predict the point where a market will make a turn?  I think it’s easy to say that equipped with that knowledge, you could make serious money.

After years of trading markets and then trading the forex, I’ve found a method that works for me.  Fibonacci forex trading gives me a good idea where I can make profitable entries and exits.

Okay you’re probably thinking that there is no “holy grail” or sure thing in trading the forex.  You’re definitely right that there is no holy grail.

All I’m looking for is an edge and Fibonacci forex trading gives me that edge.  As you read this article, I think you will begin to see what this method does to serve you well in your forex trading decisions.

I’m not trying to give you information on what Fibonacci is derived from or why it works.  Let’s just say that it gives you probable points where a move up or down will retrace and then where that retracement will likely end.  

Retracements will never take place where you expect them to all of the time however.  Nothing works 100% of the time so you have to use common sense and keep your losses small.  Always be ready to get out of a trade if your entry is wrong.  You will enter again because you have the odds in your favor in the long run.

These points of retracement based on Fibonacci can be used on any time frame.  If you trade using weekly or 5 minute charts, Fibonacci points can be a reliable point to determine entry or exit.

An example of a move I like to trade is helpful here.  I trade longer term but this method can be used with any time frame.

If the trend on a daily chart is down I will then look at the 1 hour chart for a possible sell or short trade.  Remember however, that there is no such thing as a short sale in forex.  You’re just selling the currency rather than buying.

The main 3 turning points in Fibonacci forex trading or any Fibonacci trading are the 38%, 50% and 62% retracement areas.  If there is a 38% retracement for instance on the 1 hour chart I am now interested in making a possible entry.  However, I need some type of confirmation that the retracement move may be running out of steam.

Although I’m not a big fan of MACD, stochastics or many of the popular indicators, I would be looking at one of them to see if possibly the market is overbought.  If so, and I felt the market was turning back down again, I would enter a sell trade in hopes that the trend would continue back down.

My stop would be placed above the 38% retracement area and I would look for a profit at least 2 or 3 times what my stop is.  

This is just one of my Fibonacci forex trading methods.  It is a method that works for me.  I also sometimes utilize other strategies in my trading.  Please visit http://www.makemoneytradingforexblog.com for more information on forex and how I make money trading the forex market.

Source by Gerald Patterson