Fibonacci Trading Is Now In The Technical Analysis Mainstream
Here is more background and information on fibonacci it and how it is used in fibonacci trading. The Italian mathematician born in Pisa in the 12th century, Leonardo Pisano, better known as Fibonacci, have known to have discovered numbers from his observations of the Great Pyramid of Gizeh in Egypt. The Fibonacci numbers are a series of numbers, where the successive ones are the sum of the previous two numbers. As for example -
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.
Besides his magical sequences, it is the ratio which brings in the importance in this discovery. If you work out the quotient of the adjacent numbers in the series, you will find an amazing result of arriving at the same number of 1.618. It is the inverse of 0.618. There are many names given to this ratio, such as, the golden ratio, the golden mean, PHI, and the divine proportion. The dimensional properties of this discovery are the adherence of the number 1.618, which occur repeatedly. There are many applications of this sequence in Finance, such as, retracements, arcs, fans, and time zones.
Fibonacci came into the technical mainstream of the equity market with the introduction of stock trading software. Its popularity exploded when traders started to play around, and experimented with the arcane mathematics, and started to discover its virtues. The interaction between the trend and counter-trend markets is described by the Fibonacci ratios. When the golden ration percentages, 38%, 50% and 62%, are applied after a trend in either direction, one can predict the extent of the counter-trend swing. On placing a grid over the up or down waves, you can find how the percentages cross the key price levels. The main technical analysis of support and resistance levels on bar charts, are the major components, which identify the entry and exit points. The key Fibonacci percentage "retracement" levels should not be overlooked while you determine the support and resistance levels on the charts. There are two most important technical percentage retracement levels in Fibonacci ratios, and these are 38.2% and 62.8%. The other retracement percentages include 75%, 50% and 33%. Most of the tracking of retracement of a price uptrend is done from its beginning to its most recent peak. As an example, let us suppose that a price trend starts from zero, peaks at 100, and drops back to 50. This would have a retracement of 50%. Fibonacci is a faster process in achieving the right results in your stock trading activity. It helps you to make proper and faster decisions, and it is a powerful tool that helps to reduce your losses, while you maintain your investment strategy. This provides opportunities in making profits in trading. If you are a professional trader, you would find many of the web sites offering their customers with sequence formula charts, technical analysis, and detailed pattern recognition scans, and levels of various stocks and markets. Fibonacci sequence and technical analysis has become the everyday tool for investors, in buying and selling of stocks. These web sites also have experts to explain or to help an experienced trader like you in the issues that you might have, while trading. You need to register to one of these web sites and become a member to avail the facilities.
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