Many people familiar with Forex or other markets (stock, resource) have an idea of various strategies, as well as technical and fundamental analysis. There are a great many of them, from the simplest signals to the most complex systems consisting of many interacting indicators and oscillators.
What it is?
The described tool is one of the ways to carry out technical analysis, but it is very specific and requires special knowledge from the trader to carry out transactions. In addition, its use is best combined with other methods of market research, for example, multiframe analysis and indicators of trading volume, however, any system for concluding transactions is individual for each.
The essence of this tool
Fibonacci time zones are a certain sequence of lines that are built vertically and located in special numerical intervals (approx. 1, 2, 3, 5, 8, ... n) and so on to infinity, but usually ends in 89 or 144, depending on given parameters.
When this indicator is superimposed on the terminal, its main line passes through the smallest or largest point of the chart. Subsequent bands come from it with increasing intervals, corresponding to a special mathematical sequence, which is followed by Fibonacci time zones. Further, it remains only to analyze the information received.
Fibonacci time zones: how to use?
Before you start working with this indicator, it is important to find the pivot points of the price and choose the most powerful situations on the chart associated with changes in the trend. After you find a price change, use the tool presented in the terminal of your broker or on a third-party resource. As a rule, it is called " Fibonacci time zones" (sometimes periods). Next, you should connect the found price reversal points - and you will see areas of potential changes in the future.
However, it should be remembered that these are just possible levels of dynamics of price behavior, so the lines will not give any guarantee of the mandatory nature of these changes. In addition, you should not trade using only Fibonacci time zones, as this tool does not give a complete picture of the market. But it can be used as a source of information for a specific strategy, using other indicators, for example, the relative strength index, moving averages and many different popular forecasting methods.
The most important thing in this method is the search for the primary interval for entry, as well as the fact that periods give the best result on large time frames (hourly, 4-hourly, daily, weekly charts).
There are other Forex strategies. They are quite specific. Many of them do not use Fibonacci time zones, but they can be combined, thereby filtering transactions and obtaining additional information about the state of the market. In the case of currency trading, any information is never redundant.
You should also remember the high degree of risk of such operations and follow common sense.