FIBONACCI ANALYSIS - FIBONACCI TRADING
What we know as the Fibonacci sequence is more ancient than the Leonardo connected with its name. Sanskrit writings circa 500 BC reference the peculiar properties of this same number sequence. It's not clear when Fibonacci ratios were first applied to the stock market or to commodities trading. The earliest well documented use of Fibonacci technical analysis for stock trading was by RN Elliott who uncovered in the 1930s that Fibonacci ratios were closely related to the growth and decay patterns of stock and commodities prices. Elliott developed those Fibonacci ratios into the Elliott Wave Theory.
Almost every stock trader is at least familiar with Fibonacci technical analysis and many have used the retracements Fibonacci trading technique in their stock market analysis. Most commercial stock charting software offers the retracements feature as a trend or direction indicator. Some technical trading software offers
lines, Fibonacci spirals and fans.
But very few know Fibonacci analysis. Fibonacci analysis is the proverbial iceberg of technical analysis. The visible part is only a small portion of the substance. Did you know that Fibonacci retracements can be used effectively for growth (vs. decay) forecasts? Do you know the Fibonacci retracements level that is the veritable Death Zone of new swings? Do you know which Fibonacci technical analysis techniques and ratios are the most useful for market timing? And how that changes with technique? Fibonacci trading is more than Fibonacci charts cluttered with retracements. You must also know Fibonacci Parallel Projections and Fibonacci Extensions and how to apply them for time as well as price, and which Fibonacci ratios you should be looking for in different technical trading situations. Fibonacci trading is most potent when integrated into wave analysis as these Elliott Wave Trading Guidelines suggest.Source: www.tradingfives.com