The Fibonacci Sequence is a special and intriguing set of whole numbers that, as far as anyone knows, runs on indefinitely. It begins:

1, 1 , 2 , 3, 5, 8, 13, 21…

This sequence was first discovered and written of by the mathematician and philosopher Leonardo of Pisa (aka "Fibonacci") in the year 1202. Some have speculated that it actually was first known to the ancient mathematicians of the Indus Valley region.

Now, the Fibonacci Sequence has many intriguing properties–not the least of which is that it was first discovered by Leonardo when he was trying to figure out how many pairs of rabbits he could have by the end of one year's time if he started off breeding just one young pair (barring any accidents, rabbits don't die in only one year, so he would have all of the rabbits that were bred, plus the two he started off with, at the end of one year). This fact of how he discovered his famous sequence means that it has its roots in very practical applications, not abstract mathematical theories.

This quality of practical application has found its way into the world of Forex trading (and other market trading). In Forex trading, we use what's known as "Fibonacci Retracement".

Fibonacci Retracement is a technical trading tool for predicting the probability that a given financial asset's price will "retrace" by a significant amount and, then, find "support" or come up against "resistance" at certain key Fibonacci levels before then moving once more in the original direction it took before the retracement.

Incidentally, these key Fibonacci levels are found by making use of the key Fibonacci ratios, which are 23.6%, 38.2%, 50%, 61.8%, and 100%.

Got that? Well, I know it probably sounds abstruse, but the fact is that this is a very popular technical tool and widely used, because it really works to help traders pinpoint strategic moments for their transactions to be placed, and helps them to set target prices as well as stop losses.

Well, why do you need to have some technical aspect to your trading? Because if you don't, you're at the mercy of your emotions, and that spells B-R-O-K-E in the end. Only by taking your emotions out of your trading strategy can you hope to be successful and possibly make your fortune, and the Fibonacci Retracement tool is marvelous for helping you do this.

What's a retracement? It is a reversal, which tends to be sudden, in the direction of an asset's price trend–so if it's been steadily rising it falls, and if steadily falling it rises. A retracement counters a prevailing trend in the asset's pricing–or, that is, causes a "correction". This could happen because of sudden bad news about the industry the asset is held within, such as if Iran decides to blockade the oil tankers in the Persian Gulf and you're trading in oil futures. But, with the Fibonacci Retracement tool, traders find that they can accurately pinpoint how much of a correction there will be before the asset stops reversing its pricing trend and returns to it. This is because the sequence is able to predict the probability of mass human behavior with surprising accuracy.

Now, "support" is a historical price level below which, once an asset reaches it, the asset has always tenaciously resisted falling any lower–and this is because at this point, many more buyers choose to buy the asset because they expect it to rise from there. "Resistance" is a historically known price level at which an asset will trade for a time, but in all probability will not exceed; this is because at this price, more sellers than buyers enter into trading of this asset and drive the price back down. As you might have guessed, the key Fibonacci ratios are accurate predictors of support and resistance, too.

So, by learning how to use Fibonacci Retracement, you can learn how make enough money to buy all the rabbits you want.

Fern Joseph is a mother of three and passionate about trading Forex. She hosts her own website, Forex Mommy