Leonardo of Pisa, aka the mathematician "Fibonacci", published his Fibonacci sequence in 1202. Fibonacci came upon his now very famous sequence of numbers when he was trying to breed rabbits and figure out how many pairs of rabbits he would have at the end of one year based upon their breeding behavior. This is just the kind of no-nonsense approach that Forex traders are into.
While many think of the Fibonacci sequence as a mathematical abstraction, it is grounded in a real world application. The Fibonacci sequence can be used to predict patterns which would not otherwise be apparent.
So how is the Fibonacci sequence applicable to currency investing? Savvy investors know that there are patterns to the movements of the stock and currency markets which can be seen by studying the past behavior of investors. The market truisms "buy low, sell high" is based on an understanding of these market patterns.
Hidden patterns of investment marketing cannot be seen up close. There is no accurate sense in trying to predict the hourly or daily fluctuations of investment markets. However, overall extended trends very well can be. Increased profits are taken advantage of when investors and Forex traders confidently use the number sequence of Fibonacci to reach their gains.
The Fibonacci sequence is a series of numbers in which each successive number is the sum of the two previous numbers. So it goes 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, and into perhaps infinity. There are a number of interrelationships held within these numbers; for instance, any given number is approximately 1.618 times the preceding number, and 1.618 happens to represent the ancient Greeks' "golden ratio"--considered to be the supreme essence of balance (and balance is the ultimate key to successful investing).
The most common applications of the Fibonacci sequence for investment purposes are retracements and arcs.
A Fibonacci chart is made of three curved lines which represent support levels, key resistance and ranging. A trendline is first drawn between two points (generally the high and low points over a given period of time). Three curved lines are then drawn which intersect the trendline at the 38.2%, 50% and 61.8% points. Decisions about buying and selling are made at these points (i.e. - when the price of the commodity in question reaches these points).
Next is the retracement - this is when the movement of a stock or other traded commodity reverses direction; this is a reversal which is stronger than the prevailing trend of the stock's movement. Retracement patterns are looked at closely by investors; a Fibonacci retracement can be used to analyze the odds of a commodity's price having a larger than average retracement before continuing back on the direction it had before reversal. The trendline is typically drawn between two extremes and is divided vertically by the Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.
The Fibonacci retracement is widely used by sophisticated traders to find: strategic places for transactions to be placed; target prices; and stop-losses. Other technical tools including Tirone levels, Gartley patterns, and Elliott Wave theory all make use of retracement.
The reason that the Fibonacci sequence is used in investing is simple: it works! Forex traders in particular in particular seem to find it useful in making profitable trades. - 21511
While many think of the Fibonacci sequence as a mathematical abstraction, it is grounded in a real world application. The Fibonacci sequence can be used to predict patterns which would not otherwise be apparent.
So how is the Fibonacci sequence applicable to currency investing? Savvy investors know that there are patterns to the movements of the stock and currency markets which can be seen by studying the past behavior of investors. The market truisms "buy low, sell high" is based on an understanding of these market patterns.
Hidden patterns of investment marketing cannot be seen up close. There is no accurate sense in trying to predict the hourly or daily fluctuations of investment markets. However, overall extended trends very well can be. Increased profits are taken advantage of when investors and Forex traders confidently use the number sequence of Fibonacci to reach their gains.
The Fibonacci sequence is a series of numbers in which each successive number is the sum of the two previous numbers. So it goes 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, and into perhaps infinity. There are a number of interrelationships held within these numbers; for instance, any given number is approximately 1.618 times the preceding number, and 1.618 happens to represent the ancient Greeks' "golden ratio"--considered to be the supreme essence of balance (and balance is the ultimate key to successful investing).
The most common applications of the Fibonacci sequence for investment purposes are retracements and arcs.
A Fibonacci chart is made of three curved lines which represent support levels, key resistance and ranging. A trendline is first drawn between two points (generally the high and low points over a given period of time). Three curved lines are then drawn which intersect the trendline at the 38.2%, 50% and 61.8% points. Decisions about buying and selling are made at these points (i.e. - when the price of the commodity in question reaches these points).
Next is the retracement - this is when the movement of a stock or other traded commodity reverses direction; this is a reversal which is stronger than the prevailing trend of the stock's movement. Retracement patterns are looked at closely by investors; a Fibonacci retracement can be used to analyze the odds of a commodity's price having a larger than average retracement before continuing back on the direction it had before reversal. The trendline is typically drawn between two extremes and is divided vertically by the Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.
The Fibonacci retracement is widely used by sophisticated traders to find: strategic places for transactions to be placed; target prices; and stop-losses. Other technical tools including Tirone levels, Gartley patterns, and Elliott Wave theory all make use of retracement.
The reason that the Fibonacci sequence is used in investing is simple: it works! Forex traders in particular in particular seem to find it useful in making profitable trades. - 21511
About the Author:
Richard U. Olson uses the incredibly accurate Forex Expert Advisor and he recommends it to make consistent profits in the Forex markets. Grab his FREE e-course on The Crucial Facts On Forex Trading to achieve your financial freedom.
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