1+1=2 1+2=3 2+3=5 3+5=8 5+8=13 8+13=21 13+21=34 21+34=55 etc
These numbers possess an intriguing number of interrelationships, such as the fact that any given number is approximately 1.618 times the preceding number and any given number is approximately 0.618 times the following number. For reasons that remain unknown, major ratios drawn from Fibonacci numbers describe a predictable interaction between trend and countertrend movement in markets. The most important ones to remember are 38.2%, 50% and 61.8%. Applying these percentages to trending price predicts the extent of retracement contrary to the underlying trend, as well as how far a new high or low will travel. For traders, these hidden points represent invisible support or resistance zones where prices will hesitate and/or reverse. Most markets and stocks swing off Fibonacci ratios as they move from support to resistance and back. Fibonacci retracement works as well on intraday charts as it does on weekly and monthly ones. Fibonacci retracements are displayed by first drawing a trend line between two extreme points, for example, a trough and opposing peak. The retracement tool then automatically inserts a series of three horizontal lines intersecting the trend line at the Fibonacci levels of 38.2%, 50% and 61.8%. After a significant price move (either up or down), prices will often retrace a significant portion (if not all) of the original move. As prices retrace, support and resistance levels often occur at or near the Fibonacci retracement levels.Trackback this article from your own site.
