The two levels that a Fibonacci calculator can help you set are:

Support level – This is a price below which, trading history tells us, it is difficult for a particular market to fall. This can be calculated by the Fibonacci calculator and can also be identified on a technical basis by seeing where the stock has bottomed out in the past.

Resistance level – The opposite of a support level, this is a price level above which a particular market price has historically found it difficult to break above.

Used correctly, the Fibonacci calculator can help a forex trader work out where to set the following three orders and maintain control of their accounts. They are:

Stop-loss orders – This is an order placed with a broker to sell a security when it reaches a certain price. An order such as this should limit the scale of potential loss for a trader.

Stop-limit orders -This is an order which allows a trader to ensure that once a certain price is achieved on a stock or commodity. Once the stop price is reached, the stop-limit order directs the broker to buy (or sell) for at least the limit price.

Take-profit order – This order is used by forex traders to specify the exact rate or number of pips from the current price point at which to close out their current position and take a profit.

So how does the Fibonacci calculator work?

Fibonacci calculations can be used for any currency pair and with any time frame. However, the bigger the time frame, the more accurate results traders should expect applying Fibonacci calculations.

The Forex Space Fibonacci calculator is a simple and useful tool that will help you to calculate Fibonacci extension and retracement levels for the market price.

When a stock price moves X dollars in one direction, then turns around and moves Y dollars in the previous direction, we say that there was a retracement of $Y.  Many traders look for retracements where the X/Y is Phi, the golden ratio, and the Fibonacci calculator can help you find it.

These calculations are important because with them you will be able to anticipate market price moves and plan future trades according to the calculated results.

Whilst the ForexSpace Fibonacci calculator can be very useful in extension and retracement levels, it is not enough to use this tool on its own and expect to succeed in trading. The key is, as with all of these forex tools, to use the Fibonacci calculator in conjunction with all the tools and indicators you have learned about throughout your forex education.