Online Discount Trading Broker
Open Online Trading AccountOnline Trader LoginCustomer Reports
live Customer Service
 

Thursday, May 29, 2008

Fibonacci Sequence and Trading

Fibonacci sequence was discovered by Fibonacci (actual name Leonardo Pisano), an Italian mathematician in early 13th century. The series is very simple where a number in the series is the sum of preceding two numbers (1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144……).

The more interesting aspect of the sequence is that there is reasonably definite relationship between all the numbers in the sequence, which can be represented as ratios, like every number is 1.618 of its preceding number. The important Fibonacci ratios are 0.236, 0.5, 0.382, 0.618, 0.764, 1, 1.382, 1.618, 2.618, etc. These ratios – also known as ‘Golden Ratio’ - are very common in nature.

Fibonacci ratios are also widely applied in trading of diverse financial instruments for various purposes. Usually they are applied to charts to find out support and resistance levels, to predict entry and exit points, longevity of trends, trend reversals, creating stop-loss orders, profitable positions, etc. There are also many trading systems built around these ratios. The four most popular Fibonacci trading applications are Fibonacci Arcs, Fibonacci Fans, Fibonacci retracements and Fibonacci time zones.

Over the years many traders made more complex Fibonacci applications, which made them difficult to be understood by novice traders. But once traders understand the basics they can make use of Fibonacci ratios with other trading tools and indicators to better perform the trades.

NobleTrading.com Features

Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

0 Comments:

Post a Comment

Blog Home    Archive List     <<Previous    -    Next >>

Enter your email address:


Delivered by FeedBurner
View Feed On
Add to Google Add to My Yahoo! Add to My MSN Subscribe with Bloglines Subscribe in NewsGator Online Other Feed Readers