Many traders feel
Fibonacci analysis is the holy grail for pinpointing
market turning points
Fibonacci
numbers are one of the most powerful tools available
for trading FOREX
If you could
choose just one method for determining price swings
in any financial market, I'm certain most traders
will agree that trading "Fib" levels would be it.
Most people
have never heard of Leonardo de Pisa de Fibonacci
yet his golden ratios are all around us.
As an online
currency trader, this may turn out to be one of your
most important analysis tools.
Born in Pisa
Italy and educated in North Africa, Leonardo was
considered to be the greatest European mathematician
of his time.
Leonardo de Pisa de Fibonacci
A few of Leonardo's accomplishments:
* Wrote the Libre Abaci (Book of
Calculations)
* Introduced the Hindu-Arabic number
system to the western world
I’m sure you’ve seen these numbers –
1, 2, 3, 4, 5, 6, 7, 8, 9, 0
One of Leonardos' most famous
experiments was trying to determine how fast rabbits could multiply in an ideal
situation starting with a single pair of rabbits that give birth to another and
so on considering each new pair becomes productive the second month after birth.
Here’s the answer…
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89,
144, 233, 377, 610, 987, and so on.
Notice that each number is a sum of the
preceding two?
This series of numbers is known as the
Fibonacci sequence.
When you start dividing these numbers by
each other, you get the following ratios:
.382
.50
.618 -- This is known as the golden
ratio
.786
1.27
1.618
2.618
These numbers are absolutely everywhere
in the world around us!!
* Piano keys vibrate in relation to each
other at a .618 ratio
* The diameter of the moon is .618 that
of the earth
* Your eyes, ears and mouth are all
placed on your face at "Fib" ratios
* The distance from your navel to the
floor is a 1.618 ratio
* Your family tree is a "Fib" sequence
* Here are some common trees that grow
in Fibonacci sequences --
* Pine cones, pineapples, broccoli,
cabbage and many more fruits and vegetables grow in these ratios
* The crucifix design is based on fib
ratios
* I could fill pages and pages with
examples of things in our lives influenced by this numerical sequence.
It is a well
know fact that the human eye is attracted to Fib ratios.
Simply put, Fib numbers are part of the
laws of nature. They are in our music, our architecture, our DNA, absolutely
everywhere!!!
Because financial markets like the FOREX
are simply humans buying and selling, Fib numbers play an important part there
too!!
Pull up any financial chart, stocks,
bonds, currencies, commodities, etc., apply Fib levels and you'll be amazed at
how often prices will react at those levels!
The most popular ratios for trading are:
.382
.50
.618 -- This is known as the golden
ratio. When price hits up against a “.618,” it is highly probable there will be
a reaction of some kind.
.786
1.27
1.618
2.618
Why are Fib ratios so effective in
trading?
* They are part of the natural laws that
govern our world
* Because the markets are merely humans
interacting which each other and human behavior can be measured and even
predicted with Fib numbers!!
* Many professional traders look for and
use Fib analysis in their trades, this phenomena alone may be enough to cause
the markets to react at Fib levels!!
Here's a good video on the subject of
Fibonacci trading...
