It is now common knowledge that almost everything (if not everything) around us including the behavior of prices as they go up or down, follows a significant pattern that corresponds to the infamous Fibonacci number series. The series is in fact believed to be another law of nature. Technical analysts studying foreign exchange rate movements have observed a similar pattern followed by the currencies, and determined that prices stall and retrace at points that correspond to the Fibonacci numbers. They then developed a forex calculator to determine where the possible support and resistance lines are using the Fibonacci values namely 23.8%, 38.2%, 50%, and 61.8%.
You really don’t have to know how to do the Fibonacci calculations since there are forex calculators which can do it for you and on real time at that. The important thing is for you to know that a lot of forex traders out there are also watching these Fibonacci levels. They are more than likely to make a move at the approach or breach of these Fibonacci levels.
The Fibonacci approach in determining possible resistance and support lines is more scientific and has more logical foundation proven by time and by nature itself than the simplistic pivot point method. Its popularity though, is not as grand as pivot point because people by nature abhor making complicated calculations much less understand how they are done.
However, anyway you technically analyze forex price movements; the nutty head of the Fibonacci series pokes its head in the form of a retracement level or a resistance line. The more savvy investors and technical traders watch them a lot. In the process, they become self-realizing trading points. Again, by the sheer number of traders using them as a trading barometer, prices are likely to stall, albeit even temporarily at any of these Fibonacci retracement levels.
Quite a number of forex traders have included forex calculators that determine the various Fibonacci levels as part of their trading tools for foreign currency trading. And this is for good reasons. With the benefit of hindsight and numerous rigorous back testing, prices have been found to always retrace their steps in series that corresponds to the Fibonacci numbers. You can therefore expect a lot of traders making their buying and selling activities around these levels.
Trading platforms are usually equipped with numerous forex calculators for analyzing price movements. Fibonacci calculator is often the most popular among them. By tradition, practical traders make their moves around resistances and support. Their need for an objective and scientifically proven method of determining resistance and support lines will always be there with Fibonacci calculators as an important trading tool to help them weave their way to profit.
You should, however throw some caution to the wind when using forex calculators. While they may appear to be effective tools to objectively determine important price action points, you should always bear in mind that they are not the reasons why prices move. Prices move because of some underlying fundamentals compelling enough to attract traders to make a move in the market.