Charm with Fibonacci – Merchant’s advantage

Fibonacci, not so many people, is very interesting in itself, except for mathematics and trade.

It is very interesting to see how each number in the Fibonacci sequence is related to each other in a certain ratio (ie..618, 1.382, etc.) and then to relate these ratios to natural objects. A few minutes after beginning to study Fibonacci figures, he is drawn to the world of plant proportions and the architecture of pyramids and other monuments.

The connection between Fibonacci numbers and everything in nature also exists in the trading world.

When I started trading in the markets in the mid-80s, my attention was like many new traders. Selection analysis was key. Listen to the news, recommendations from your friends and talking heads, or the brilliance of demand / demand numbers. But then something wonderful happened in the early 1990s. (For myself) I discovered Fibonacci and its basic application to price and time analysis. Since then, I’ve focused on Technical Analysis, and I’ve never listened to another boss (or friend) talk about what to buy or sell again.

There are many Fibonacci applications for trading. Most traders who use Technical Analysis are familiar with the basic Fibonacci use in chart analysis. Some basic examples:

Solution for Support or Resistance – This is called “intermediate” after prices have been trending in a certain direction for several days / weeks / months, either from a significant bottom or up from a significant peak. The trader determines the range, then multiplies this range by .382 and 618 Fibonacci ratios. The results are subtracted from the upper price (if the range is above the bottom) or added to the lower price (range from top to bottom) to obtain support or resistance price levels, respectively. Additional ratios are included in this calculation.

Resolving over time – A basic but attractive approach to using Fibonacci is to count the days / weeks / months between previous market peaks and bottoms and multiply the number by Fibonacci ratios. The result is calculated from the top up or down when the top or bottom is likely to occur.

Fibonacci-based transfer and graphical analysis are more advanced (or more unknown) applications for ratios.

For example, there is the use of Fibonacci spirals, which gives both time and price results.

Fibonacci ratios are available in conjunction with time / price quadratic results.

There are many techniques and methods you can use to take advantage of Fibonacci markets!

In my graphics program I often use what is called Fibonacci Fan Lines. The application here is similar to the one shown above under “Support or Resistance Solution”, the main difference being that the Fan Lines form DYNAMIC support and resistance levels (values ​​vary for each time interval in the diagram, higher for ascending lines and lower for descending lines). They also require that the samples be placed in two spaces (top to bottom or bottom to top). You simply label the range as A, B, and C. For example, the ranges from top to bottom and from top to bottom will be labeled as “A” for the first top and “B” and “C” for the bottom below. the last peak. The range “B – C” is divided by Fibonacci ratios, and then lines are drawn by dividing the range “A” to “B – C” by the future. These are your support / resistance levels.

Another attractive approach to using Fibonacci for chart analysis is to add Fibonacci series numbers to any significant top or bottom to get future peaks and bottoms.

For example, a series starting with 3 can be 3, 5, 8, 13, 21, 34, 55, and so on. It will be. Add any two numbers in a row to get the next number in the series. Now find a top or bottom in your price chart and from there 3 bars, 5 bars, 8 bars and so on. Count. This is the time to follow the possible market peaks and bottoms.

These are just a few of the many examples you can do with Fibonacci and from your application and graphical analysis. Try them for yourself and I’m sure you will be amazed by Fibonacci too!

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