I would delve straight into the application of fibonacci levels (retracements and extensions) for the forex market rather than talk about its origins, etc. But first ... here are the fibonacci Levels (Strictly speaking, some of the following are not fib numbers but they are relevant as far as trading goes):

• 0, 23.6, 38.2, 50.0, 61.8, 76.8
• 100, 121.4, 138.2, 161.8, 176.8
• 200, 261.8 and 423.6

The 5 most important ones to take note are 38.2, 61.8, 121.4, 138.2 and 161.8. But first ... let's address the question of "What are these fibonacci levels?". The way I use it I simply consider them support and resistance levels because that's basically what they are. These levels can both be used for entries and exits. I use them more for exits however. Let's see how we could use fib retracements ... on the following 1hr EURUSD chart ...

Now consider how we could use fib extensions on the VERY same chart ...

Hey ... let's not also forget that we can use these extensions on the daily chart ...

Going into the longer timeframes, we have the GBP weekly chart here ...

I guess the thing to think about is fibs (ret/ext) exist across ALL timeframes .... from your fast moving 5m to your crawling weekly and monthly charts. You may ask "How can we use these fib levels to our advantage then?" ... Well, as I've shown in the above examples, you could use the extensions to maximize the number of pips you take out of your trade and get in on the prevailing trend using the retracements. Some traders also use the break of the 61.8% level as a sign of reversal / change in trend. There's an analogy of the fib levels I came up with that I like to share with you ... Think of the first few retracements and extensions (supports/resistances) as layers of paper and plastic and the further levels of retracements and extensions as layers of wood, glass and concrete. Not sure if that helps you though ... In conclusion, I don't suggest that you use fib levels alone as your standalone entry/exit signal (though you could) ... Rather, add them to your arsenal of tools and use it as an extra level of confirmation for your bias. Hope this has helped loads and given you some ideas ... Cheers!

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