The Truth About Fibonacci
Trading
Very few
traders take the time to see or figure out. As the saying
goes... We all look, yet very few can really see.
Looking at a chart and seeing what is really going on is usually the difference
between success and failure in trading.
To the Technical Trader, the chart is nothing more than what an x-ray is to a
Doctor. It is telling a story
high probably of the next move in the market.
The main reason most traders lose money in the market is they have no idea how
to make sense of all that price movement
.
"Where should I get in?
Where is the safest place?
How much can I afford to risk?
How much will I gain?
Should I wait a little longer?"
Leonardo Fibonacci was a great mathematician who lived in
The Fibonacci sequence goes like this... 1+1=2, 1+2=3, 2+3=5, 3+5=8, 5+8=13,
8+13=21, 13+21=34, etc. all the way to infinity. We arrive at this numerical
sequence by simply adding the last two numbers together for the sum of the
next.
In our experience we have found that 100% objective fibonacci
price projection and retracement methodologies will give you foresight into the
potential upcoming moves in time and price in the market you are currently
trading whether you trade a daily chart or five-minute bars.
Fibonacci Projections and Retracements
To predict where the market may go in the future. To
determine turning points in advance is important for every trader.
Fibonacci ratios are common in almost everything in nature from flowers, to
the human body, seashells etc.
Elliot wave is extremely ambiguous and often too difficult for most traders
to implement into their trading strategy with any degree of consistency.
Fibonacci ratios however are just as, if not more powerful and can be done
under a more rigid set of rules.
Fibonacci ratios are easy to use and just as easy to calculate. You take the
range from one pivot to the next and add or subtract the ratios.
The important fact or phenomena is, the market moves in a Fibonacci sequence
of ratio price movements. There are rallies, retracements and extensions as
well as dips, retracements and extensions.
Some common Fibonacci ratios (geometric): 0.382, 0.50, 0.618, 1.000, 1.618,
2.000 and 2.618.
Special Fibonacci ratios (harmonic & pyramid): 0.707, 0.786, 1.414, 1.272
and 2.236.
Types of Fibonacci Price projections
1. Extensions
2. Alternates
3. Expansions
4. Retracements
The Fibonacci Sequence and the Wave Principle
Both the Fibonacci sequence and the Fibonacci ratio appear ubiquitously in
natural forms, ranging from the geometry of the DNA molecule to the physiology
of plants and animals to patterns of human mentation.
Ralph N. Elliott's publisher, renowned investment advisor Charles Collins,
first realized that the Wave Principle is connected to the Fibonacci sequence
and communicated that fact to Elliott. After researching the subject to the
small extent possible at the time, Elliott presented the final unifying
conclusion of his theory in 1940, explaining that the progress of waves has the
same mathematical base as so many phenomena of life.
The Fibonacci sequence governs the numbers of waves that form the movement of
aggregate stock prices in an expansion upon the underlying 5-wave-3-wave
relationship. The simplest expression of a corrective wave is a straight-line
decline. The simplest expression of a motive wave is a straight-line advance. A
complete cycle is two lines. At the next degree of complexity, the
corresponding numbers are 3, 5 and 8. This sequence continues to infinity.
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