Learn The Basics About Fibonacci Analysis & It's Application To Trading The FOREX market
Fibonacci Numbers
Fibonacci numbers are the result of work by Leonardo
Fibonacci around 1170 while studying the Great Pyramid of Gizeh. The fibonacci numbers are a numerical
sequence shown below:
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144... and so on to
infinity
This sequence of numbers appears to have little importance to
the untrained eye however there are many remarkable properties:
1. The next number in the fibonacci sequence is
obtained by adding the current and previous number, e.g. 1+2=3, 8+13=21
2. After the 1st couple of numbers, if you take the ratio of
any two consecutive numbers you get approx 0.618, e.g.
3/5= 0.6
5/8= 0.625
8/13= 0.615 and so on
3. If you take the ration of two alternate numbers you get
approx 0.382, e.g.
3/8= 0.375
5/13= 0.385
8/21= 0.380 and so on
It has been found that the Fibonacci numbers sequence
can be used to predict many things that occur in nature, science, math's and engineering. In trading the
sequence is used as the basis for the Elliot Wave Theory which is used to predict stock market
patterns.
In the technical analysis of stocks Fibonacci numbers
are commonly used to determine potential support, resistance, and price objectives.
A 38.2% retracements usually imply that the prior trend will
continue, and are considered natural retracements in a healthy trend.
A 61.8% retracements imply a new trend is establishing itself.
A 50% retracement implies indecision.
The average trader does not need to know all the details about
the sequence because all the calculations are usually performed by the trading tool (if it incorporates
fibonacci numbers), however the trader must understand how to apply the retracement levels in order to make
trading decisions.
See the Fibonacci
Trading Risk Calculator to see the calculations in action.
There is a great new CD tutorial course that will teach you everything you know to develop the ability to
pinpoint market top and bottom turning points. Check out the "FibonacciSecrets" CD Course by
clicking here
Report is provided by permission of Mark
McRae, by the same author are these excellent trading courses and ebooks:
Trading For Beginners
The Surefire Forex Trading Course See also [ Fibonacci Trading Risk Calculator ] |
