What are Round Numbers?

Round numbers are numbers that end in zero numbers. For example, in EURUSD some zero-number prices are 1.2810, 1.2920, 1.3030, etc. In another example, the zero-number prices of GBPUSD are 1.5020, 1.5030, 1.5040, etc. Historically, zero-ending quotes had played a major psychological effect on Forex Traders. People have the tendency to give orders in round (zero-ending) numbers. The total effect is great and thus Round Numbers constantly offer some important Support & Resistance Levels. This phenomenon can be seen in every Financial Market and especially as concerns Forex. A simple explanation is that as humans we have the tendency to seek simplicity in our actions.

 

What are Whole Numbers?

Whole numbers in Forex Trading involve double-zero ending quotes. For example, some whole numbers in EURUSD are 1.2100, 1.2200, 1.2300, etc. Whole or double-zero numbers play a huge role in Forex Trading. Massive orders are placed before pairs reach whole numbers. Usually, when currency pairs are reaching round-numbers, their volume activity booms.

 

Whole Numbers Effect -An Example of Forex Trading

Day-Traders are highly respecting Whole Numbers. For example, let’s suppose that a Trader has opened a long position on EURUSD at 1.2850 and targets 1.2910. As the whole number EURUSD price of 1.2900 is close, he will not probably wait until 1.2910. He will alter his take-profit order to 1.2898-1.2900, in a way that he can be sure that if EURUSD reaches 1.2900 his profit will be assured. Maybe if EURUSD brakes for some minutes 1.2900 and moves higher he may open a new position again by keeping a stop-loss at 1.2898.

 

 

What is the Fibonacci Retracement?

Fibonacci Retracement is considered a top technical analysis tool used to identify potential price reversal levels in every market (Stocks, Forex, etc).

 

A Historic Analysis of Fibonacci Retracement

This tool is actually based on a particular sequence of numbers identified by the Italian mathematician Leonardo Fibonacci during the 13th century AD. The meaning of these numbers is wider than any trader can think. Actually, Ratio 1.618 is spread throughout the universe while it can be found in our nature too. The ancient Greeks have used this ratio in their architecture widely. The famous Parthenon was build based on 1.618. The architect of Parthenon was named Phidias (5th century BC) and that is why 1.618 is known also as the Phi Number:

Phi Number (φ) = 1.61803398875….. This is known also as the ‘Golden Ratio’.

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» More about Fibonacci Trading at TradingFibonacci.com

 

The Fibonacci Sequence of Numbers

The sequence is based on the fact that each number is the sum of the previous two numbers, and that continues infinitely. Here are the first numbers of the sequence:

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, etc.

Here are some interesting facts about the Fibonacci sequence:

◘ Every number in the sequence is equal to the sum of the previous two numbers

◘ Every number in the sequence divided by the previous number approximates 1.618

◘ Every number in the sequence divided by the next number approximates .6180

◘ Every number in the sequence divided by another two places higher approximates .3820

◘ Every number in the sequence divided by another three places higher approximates .2360

 

 

 

The Fibonacci Retracement

Based on the above sequence some very important ratios are derived.

1) The 23.6% Ratio

2) The 38.2% Ratio

3) The 61.8% Ratio {It is called the ‘Golden Ratio"}

Additionally, some technicians are incorporating two more ratios

4) The 50% Ratio

5) The 78.6% Ratio

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