Fibonacci tools utilize special ratios that naturally occur in nature to help predict points of support or resistance. Fibonacci numbers are 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, etc. The sequence occurs by adding the previous two numbers (i.e. 1+1=2, 2+3=5) The main ratio used is .618, this is found by dividing one Fibonacci number into the next in sequence Fibonacci number (55/89=0.618). The logic most often used by Fibonacci based traders is that since Fibonacci numbers occur in nature and the stock, futures, and currency markets are creations of nature - humans.
Showing posts with label Fibonacci Arcs. Show all posts
Showing posts with label Fibonacci Arcs. Show all posts
Monday, July 26, 2010
Technical Indicators - Fibonacci Arcs
Fibonacci Arcs are percentage arcs based on the distance between major price highs and price lows. Therefore, with a major high, major low distance of 100 units, the 31.8% Fibonacci Arc would be a 31.8 unit semi-circle.
The chart below of the S&P 500 exchange traded fund (SPY) shows an example of a Fibonacci Arc:
The chart below of the S&P 500 exchange traded fund (SPY) shows an example of a Fibonacci Arc:
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