Page 3 - Module 11 The Fibonacci science

Module 11 – The Fibonacci Science

It is imperative for a trader to understand price swing. The market doesn’t only go up or go down. It
goes up and down and sideways. As it goes up and down it is swinging and waving or rallying and
reacting and bouncing off of trend lines and Fibonacci Numbers. Those mergers of Trendlines and
Fibonacci Numbers are invisible locations for support and resistance. If you learn to locate and
anticipate where those invisible levels are you can enter and exit the market and have a greater
percentage that the market will go your way from the beginning.

1. the fibonacci numerical sequence

It is amazing that an Italian mathematician, Leonardo Fibonacci, almost 900 years ago identified a
numerical sequence that provides a basis for describing the development of plants and animals.

Fibonacci numbers are started by 0, followed by 1, and then the third number is calculated through
adding 0+1 (the first and the second number). Then for getting the forth number (3), the second and
third numbers should be added (1+2) etc.

1 + 1 = 2 21 + 34 = 55
1 + 2 = 3 34 + 55 = 89
2 + 3 = 5 55 + 89 = 144

3 + 5 = 8 89 + 144 = 233
5 + 8 = 13 144 + 233 = 377
8 + 13 = 21 233 + 377 = 610

13 + 21 = 34 ….and so on to infinity

This sequence and moreover the ratios derived from combinations and derivatives of the numbers
can be used by the trader to describe the predictability of price behaviour in financial markets today.
The predictability of prices in the financial markets is based on the predictability of the humans who
comprise the buyers and sellers interacting in these markets.

To use these numbers in technical analysis you don’t have to make any calculations and you don’t
even have to memorize them, because all trading platforms allow you to draw the Fibonacci levels
and they have everything ready to use. The only thing you should know is how to use the Fibonacci
levels in the technical analysis.

For traders, the key ratios derived from the Fibonacci Numerical Sequence are:

Fibonacci Retracement Levels
0.236 i.e. 23.6%, 0.382 i.e. 38.2%, 0.500 i.e. 50%, 0.618 i.e. 61.8%, 0.764 i.e. 76.4%
Fibonacci retracement levels are used to identify areas of support and resistance.

Fibonacci Extension Levels
1.382 i.e. 138.2%, 1.618 i.e. 161.8%, 200% and 261.18%

In Forex trading Fibonacci retracement levels are used to identify areas of support and resistance.
The Fibonacci Numbers and ratios are everywhere we look in life. They are in the design of many
great structures built by man, such as the Egyptian and Central American pyramids.

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