Page 5 - Module 11 The Fibonacci science

Module 11 – The Fibonacci Science

Look at the dynamics of a wave. When a wave begins, it moves in a numerical sequence. Again, you
will see it moves based upon Fibonacci ratios.

T .
o 7
p 8
6

A fascination with the Fibonacci numbers relates to their application to financial markets. Your
success as a trader can be greatly assisted if you apply the numerical ratios in your analysis. The
ratios come about from dividing the numbers in various ways. If we divide 13 by 21 for example, we
get .619 while 21 divided by 13 = 1.615. If we skip a number and divide 8 by 21 we get .381.

Conversely, 21 divided by 8 = 2.625. The further we go in the number series, before dividing, the
close we come to achieving the exact Fibonacci ratio. We never achieve this, however, because these
. ratios are irrational fractions. One interesting aspect of summation progression is that it doesn’t
matter where we start. Take any two numbers, like 5 and 100. Soon we are dealing with the same
7 . . aspects and series.
8 7 7
6 8 8 100=105
6
6 100+105=205
105+205=310
205+310=515 .
515+825=1340 825 divided by 1340 = .616
825+1340=2165 1340 divided by 2165 = .6189 3
2165 divided by 1340 = 1.616 8
1340 divided by 825 = 1.624 . .
825 divided by 2165 = .381 6 6

1 1

8 + 1 = 2
2 3 1
5 4 6

There are 7 numerical ratios a beginner trader must know, .382, .50, .618, .786, 1.27, .618 and 2.618.
You might ask, where the .786 and 1.27 comes from? .786 is the square root of .618 and 1.27 is the
square root of 1.618.

A price swing is a constant movement of prices in a single direction. A retracement is a retraction or
bouncing back in the price movement. For example, if prices increase by 100 points, then begin to
decrease the value, the increase is called a swing and the decrease is called a retracement.
Oftentimes prices will retrace back to the exact price that is equivalent to one of the Fibonacci ratios.

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