Thursday, August 16, 2007

Fibonacci Analysis

The Fibonacci analysis gives ratios which play important role in the forecasting of market movements. This theory is named after Leonardo Fibonacci of Pisa, an Italian mathematician of the late twelfth and early thirteenth centuries He introduced an additive numerical series - Fibonacci sequence.
The Fibonacci sequence consists of the following series of numbers: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, 4181, (etc.), which exhibit several remarkable relationships, in particular the ratio of any term in the series to the next higher term. This ratio tends asymptotically to 0.618 (the Fibonacci ratio). In addition, the ratio of any term to the next lower term in the sequence tends asymptotically to 1.618, which is the inverse of 0.618. Similarly constant ratios exist between numbers two terms Golden spirals appear in a variety of natural objects, from seashells to hurricanes to galaxies.
The financial markets exhibit Fibonacci proportions in a number of ways, particularly it constitute a tool for calculating price targets and placing stops. For example, if a correction is expected to retrace 61.8 percent of the preceding impulse wave, an investor might place a stop slightly below that level. This will ensure that if the correction is of a larger degree of trend than
expected, the investor will not be exposed to excessive losses. On the other hand, if the correction ends near the target level, this outcome will increase the probability that the investor's preferred price move interpretation is accurate.

6 comments:

max said...

The Fibonacci number sequence is created by adding the last two numbers in the sequence to create the next number (i.e., 1,1,2,3,5,8,13,21,34,55,89,144� �). The first three numbers in the sequence are normally dropped for analysis purposes. The number sequence creates some interesting mathematical relationships?

forex trade

Anonymous said...

Good info!

Anonymous said...

I just wish to say one thing. Deleting whole thing isn't good idea even you feel doing it. I say that from position that blogs like yours documenting now 5 years journey are inspiration to starting forex traders. I remember that few years ago when I wasn't forex trading at all but was on demo that I found your blog. It was so interesting that I read through all posts about forex trading. You don't get anything with deleting about forex trading and some others may lose. Let it be win win situation even if you don't post anymore about forex trading

Anonymous said...

Analysis is very important in forex trading, although it is almost never easy to do and usually takes a lot of time. Trading Analysis makes decision making a lot easier and the outcome is usually satisfactory. When start forex trading, analysis is very important because you can’t rely only on the money management strategy to succeed. You can forecast the direction of the market basing on your technical and fundamental strategies to see their effectiveness.

Amarjeet said...

Interesting.
forex live trading
swing trading

uncle gob said...

Fibonacci analisis is a good tool in analyse the markets. Have heared about armada markets? We can trade on iPhone, iPad or our popular MetaTrader 4 platform with extremely low floating spreads (Exchange account) or fixed spreads (Classic account). No requotes, superfast STP execution and 1:500 leverage. Start with as little as 100 euros, dollars or British pounds.