VintagEducation does not use or promote lagging indicators. The fundamental basis of our education is price action.
Lagging indicators are something which can contradict with price action therefore we advise against it.
This does not mean however, that we do not encourage any kind of indicator. From time to time we may use indicators which can help define exit points. There is an article about the ATR on the site also, which is another indicator we look to use at times. This article is about the indicator Fibonacci.
You may not know what this is so we will give a brief outline of its origin and then discuss the benefits.
So What Is Fibonacci?
Fibonacci is based on a number sequence (1-2-3-5-8-13), this number sequence is said to go all the way until infinity, which I guess is where people want to stop counting. This number sequence was created by one Leonardo Fibonacci and he discovered this sequence in the twelfth century. He carried out the research, linking the sequence to many naturally occurring examples. If you divided one number by the next, the ratios of 0.618 and its reciprocal 1.618 were found.
Many believed these ratios have some sort of mystical, philosophical significance as they are found in calculations relating to the ancient pyramids and throughout nature (for example in sea shells and petals). They are also said to be in the relationship between the lengths of bones in the body. Fibonacci for some is a religion, we do not go this far with Fibonacci, we merely use it as a tool and nothing more.
How To Use Fibonacci
Using Technical Analysis allows us to get the best entries and it also allows us to determine potential exit levels, this is because we can use the past as a forecast for the future. This is also significant because Fibonacci levels seem to pick out these former levels too.
They do not always pick them up and as stated there are more than one level, it is something which can be part of a tool kit which can help you. Fibonacci is something that can take out much time of technical analysis if you may not have the time, however this obviously has its drawbacks.
Fibonacci can be used for scoping entries as well as exits, the reality is that lots of traders are using it meaning the levels will be obeyed time and time again. When you link this with the fact that at various times in the trading day a long term trade and short term trade will correlate, those who need to sell and need to buy at the same time.
If there are thousands of advanced traders out there who are following Fibonacci then I want to follow the Fibonacci movements too, even if from a distance. Fibonacci works much better with some currencies better than others but that is for you to work out for yourself as a trader. While Fibonacci works, you should use it.