In this article, We learn about "Fibonacci Study ".Let's Go!
Fibonacci Study contains a series of technical analysis tools based on Fibonacci numbers and ratios, representing laws of natural geometry and human behavior , applied to financial markets.
Fibonacci numbers and Fibonacci ratios are used by a wide range of traders to spot potential turning points in the markets.
Fibonacci Sequence
The Fibonacci sequence was introduced by the Italian mathematician Leonardo Pisano Bogollo in his 1202 manuscript Liber Abaci.
derives the series by finding the sum of the first two numbers in the series, where 0 and 1 are the seed numbers or starting points in the series.
The first two seed numbers are 0 and 1, and the third number in the series is the sum of 0 and 1 (0 + 1), which is 1.
The fourth number in the
series is the sum of the second and third numbers in the series, which is 1 + 1, and so on.
The first few numbers in the series are:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, … ∞
Fibonacci Ratios
As the numbers in the series increase towards infinity, there is a mathematical relationship between the numbers expressed as a ratio .
For example, the ratio between consecutive numbers tends to get closer and closer to 1.618034, which is known as the golden ratio or the golden section or The golden section is represented in mathematics by the capital Greek letter Phi Φ. This ratio is achieved by dividing the number in the summed series by the number before it: 233 ÷ 144 = 1.618055
The reciprocal of this ratio is 0.618034, represented in mathematics by the lowercase Greek letter phi. This ratio is achieved by dividing the number in the summed series by the number following it: 144 ÷ 233 = 0.618025
Generally, these ratios are used to predict support and resistance levels through the relationship between Fibonacci numbers. These are the most commonly used Fibonacci ratios:
- 0.618 (61.8%): Fibonacci number divided by the following number is about 0.618.
- 0.382 (38.2%): The Fibonacci number divided by the number occupying the last two positions is approximately 0.3820.
- 0.2360 (23.60%): The Fibonacci number divided by the number occupying the next three positions is about 0.2360.
- 0.764 (76.4%): Add the difference of 38.2% and 23.6% to 61.8%, or 76.4% = 61.8% + (38.2% – 23.6%).
- 0.5 (50%): Half the progress of the main trend. This is an average between 38.2% and 61.8%.
- 0.0 (0%): The beginning of a market move.
- 1.9 (100%): The market trend is over.
To understand Fibonacci studies, it is necessary to remember the concept of support and resistance.
support : trough (or low point). At these points, buying interest is sufficient to overcome selling pressure . As a result, the decline pauses and prices rise again.
Resistance : Peak (or high). These represent price levels or areas above the market where selling pressure exceeds buying pressure .
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