.: Fibonacci Numbers – How to Use Them for Huge Trading Profits!
By:Stephen Todd
Category:Home / Finance / Stock Market Investing
The Fibonacci numbers sequence and the golden ratio have fascinated mathematicians for hundreds of years.
While Fibonacci numbers have many applications, they have received considerable interest from traders due to their uncanny accuracy in spotting market turning points in advance.
You can use Fibonacci numbers as a predictive tool and when used correctly they can enhance a your analysis of the market, helping you to increase profits and decrease risk.
The History of Fibonacci Numbers
The Fibonacci number sequence first appeared as the solution to a problem in the Liber Abaci, a book written by Leonardo Fibonacci in 1202 to introduce the Hindu-Arabic numerals used today to a Europe still using Roman numerals.
The original problem in the Liber Abaci posed the question: How many pairs of rabbits can be generated from a single pair, if each month each mature pair brings forth a new pair, which, from the second month, becomes productive.
The Fibonacci number Sequence
The resulting Fibonacci numbers 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, are the result of the following equation.
If Fn is the nth Fibonacci number, then successive terms are formed by addition of the previous two terms, as Fn+1 = Fn + Fn-1, F1 = 1, F2 =
The ratio of any number to the next larger number is 62%, which is a popular Fibonacci retracement number. The inverse of 62% is 38%, and this 38% is likewise a Fibonacci retracement number.
Fibonacci Numbers and the Golden Ratio
Fibonacci numbers are found to have many relationships to the Golden Ratio F = (1 + /5)/2, a constant of nature which was of constant interest to the ancient Greeks, appearing in both Greek art and architecture.
Fibonacci Numbers and Market Analysis
Changes in stock prices are not simply a tug of war between supply and demand but also reflect human opinions, valuations, and expectations.
A study carried out by mathematical psychologist Vladimir Lefebvre demonstrated that humans exhibit positive and negative evaluations of the opinions they hold in a ratio that approaches phi, with 61.8% positive and 38.2% negative and that Fibonacci numbers are rooted in a trader’s psychology.
Predicting Market Movements with Fibonacci Numbers
Research shows markets as being perfectly patterned, explaining that humans, being part of nature, create perfect geometric relationships in their behaviours, even if they don’t realize it themselves.
The Golden Mean is the number 0.618. In Both Greek and Egyptian cultures, this number was highly significant. They believed that the number had important implications in many areas of science and art. This dimension was utilised in the construction of many buildings - including the pyramids.
The Golden Mean appears frequently enough in the timing of highs and lows and price resistance points that adding this tool to technical analysis of the markets can help to identify key turning points.
W. D.Gann and Fibonacci Numbers
Gann was a stock and commodity trader who reputedly made over $50 million trading the markets.
Gann made his fortune using methods which he developed for trading instruments based on relationships between price movement and time and his work was heavily influenced by Fibonacci numbers.
Gann divided price action into eighths and thirds. This yields numbers such as 1/3, 3/8, 1/2, 5/8, and 2/3. In percentage terms, these fractions are 33.3%, 37.5%, 50%, 62.5%, and 66.7%. These five ratios are commonly used retracement values. Gann placed strong significance on 50% retracements.
Article Source: http://www.articles32.com
To learn more about using Gann trading methods please visit our web site: http://www.gann.co.uk
.: New Stock Market Investing Articles
1). Difference Between Paper Trading And Live Trading!
Both paper trading and live trading are important steps to accumulate wealth through stock investments.
2). Stock Index Funds - What Is An Index Fund?
You may have heard of the term before, financial indexes, but just what exactly are they. Indexes, also known as stock market indexes, are the listings of stocks and any statistics that show a full of value of any given stock in the index. These indexes are generally used to show the character of all the stocks taken together.
3). Stocks - How To Know When To Sell
Stocks can be a great investment. Most people don`t really know when it`s time to sell though.
4). Some Fundamentals of Option Trading
Option trading is an ever increasingly popular form of investment. The wide spread use of online option trading has led to many newcomers to these risky, but potentially profitable opportunities. The following is a review of some of the fundamentals of Option Trading.
5). Future Option Trading - A Brief History and Overview
Future Option Trading is similar to the Stock Options Trading in many ways, but there are also some major differences. Some of the terminology used in Futures Trading also has a different meaning than the same term when applied to Stock Option Trading, and caution must be used to avoid confusion.
6). A Sample Option Trading Strategy
When you feel you understand a bit about the Options Trading Market, and are ready to give it a try, you need to spend a bit of time developing a strategy to guide your investment decision. It is important in doing this to understand the basic difference between a strategic decision and a tactical decision.
7). Fibonacci and Golden Ratio
The Fibonacci numbers Golden ratio can be used to describe the proportions of everything from nature to smallest building blocks. This is used by many successful investors to pick trends in the charts.
.: Top Stock Market Investing Articles
1). James Dines Predicts a Buying Panic in Uranium
Over the years, Dines successfully forecast the Internet mania, forecasting the giants of the tech boom, and forecasting the tech bust. A gold bug again, Dines also added uranium as the metal to watch over the coming years, saying, “This is my way of playing the whole coming energy boom."
Interviewer: You have been calling a bull market in uranium and, once again, you were the first voice in the now-growing crowd of uranium bulls.
2). Interesting Historical Facts About The Stock Market
Did you know that the 1987 crash was worse than the 1929 crash?
3). Openwave-Could the little company ever become king?
Openwave has a very unique and valuable business in the wireless data market. It has a dominate market share of 50% in both the browser and in the gateway transitions for mobile phones. Both products are a core element in the data cell phone market.
Our philosophy is to own the critical elements in markets that appear to have revolutionary growth. In January 2004 we wrote an article saying the wireless revolution has begun.
4). A Man Who Turned a $15,000 Stock Account INTO $3,296,000 Million AND WHAT I Learned From It
The lessons I learned from a trader who turned a $15,000 account into over $3 Million with JUST two stock trades.
5). Option Trading Tip - Buy Deep In-The-Money Options
Time decay and volatility are responsible for many a broken option trading account. Discover how to neutralize these 2 forces and achieve more consistent profits!
6). The Grand Daddy Boom in Uranium
Approaching his 50th year in the uranium business, the quiet but assertive Chairman and Chief Executive of Uranium Resources (OTC BB: URIX). Paul K. Willmott talked to us about the current uranium bull market. Willmott discussed the third uranium bull market he’s experienced with both exuberance and caution.
Interviewer: How do you feel about the rising.
7). Why Is Eric Sprott A Uranium Bull?
Eric Sprott may be Canada's answer to Warren Buffet. He's got the Midas Touch and currently manages more than $3 billion. We talked to Eric Sprott about uranium and why he is bullish on nuclear energy.
Interviewer:
Uranium had been inching higher from 2001 until a year ago. Since then, it has soared up the price chart. What is a realistic price for uranium and how high can you envision it reaching?
Eric Sprott:
There is obviously a shortage between current mine production and current uranium consumption.