“Fibonacci Ratio Analysis with Elliott Wave”
Today we will learn how to combine FibonacciRatio Analysis with EW for trading entries and exits.
1.618
Learn To Trade Class #3Plan Your Trade, Trade Your Plan
We will begin at 7:30 PM ET – You will hear no sound until we start
Fibonacci Pisano Bigollo (“Leonardo Fibonacci”) circa 1170 to 1250
discovered the Fibonacci sequence by breeding rabbits.
Fibonacci “How many pairs of rabbits placed in an enclosed area can be produced in a single year from one pair of rabbits if each pair gives birth to a new pair each month starting with the second month?”
- Elliott Wave Principle
Fibonacci #’s & Ratios
The Fib sequence each # is the sum of the two #’s preceding it, starting with 0 and 1. - 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, etc.
“God does not play dice with the universe.”
- Albert Einstein
1.618Golden Ratio
1.000 0.618
FIBONACCI
FIBONACCI
0.382 0.618
0.382
0.618
Fibonacci
Fibonacci #’s & Ratios
Fibonacci #’s & RatiosThe Fibonacci Sequence
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, etc
Fib retracement ratios are the ratio of any # to it’s next higher #.
Example : 0/1 = 0 (Starting Point)
Example : 1/1 = 1 (Ending Point)
Example : 1/2 = 0.50 (Major retracement level)
Fibonacci #’s & RatiosThe Fibonacci Sequence
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, etc
Fib retracement ratios are the ratio of any # to it’s next higher #.
Once we cross the fourth set of fib #’s the ratios start to narrow down to the inverse of the Golden Ratio – 0.618
Example : 2/3 = .6666 3/5 = .6000
5/8 = .6250 8/13 = .6153
13/21 = .6190 21/34 = .617634/55 = .618155/89 = .6179
89/144 = .6180 144/233 = .6180233/377 = .6180377/610 = .6180
Fibonacci #’s & Ratios
The Fibonacci Sequence0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, etc.
Extension Ratios 1.236, 1.500, 1.618, 2.0, 2.618
Derive Fib Extension levels by taking the ratio of any # to its next lower #. The sequence narrows down to the Golden Ratio – 1.618
Example : 1/0 = 0 1/1 = 1
2/1 = 2.000 3/2 = 1.500
5/3 = 1.6668/5 = 1.60013/8 = 1.62521/13 = 1.615
34/21 = 1.61955/34 = 1.61789/55 = 1.618144/89 = 1.618
Fibonacci #’s & Ratios
0.00
0.618
0.50
100.0
0.382
2.00
1.618
Retracements -For entries
External RetracementsExpansions-For exits on trend trades-For entries on counter trend trades
Retracements ratio’s areused to analyze corrective Waves
100%
61.8% 100%
38.2%
…. by measuringprevious motive waves
Fibonacci Retracements
Fibonacci Retracements
+ Helps determine the completion of a Correction
+ Serves as potential Entry levels for trades in the direction of the larger trend
Key Ratios˃ 23.6%˃ 38.2%˃ 50.0%˃ 61.8%˃ 78.6%
0.00
0.618
0.50
100.0
0.382
0.786
1. Identify a completed 5-wave impulse & anticipatea 3-wave correction
Retracements for Entry
2. Measure impulse waveto define retracement levels1
2
3
4
5
A
B
C3. Watch for the end of correction for entry
Fibonacci Retracements
Motive Waves Already Completed
Corrective Waves To Study With Retracements
» Wave 1» Wave 3» Wave A» Wave W
» Wave 2» Wave 4» Wave B» Wave X
Retracements
Retracements Motive Wave TipQuickly access the Trading Analysis Fib ratios within the wave count
Retracements Motive Wave TipAccess the default Fib ratios from the components panel
Ext. Ret. ratio’s areused to analyze motivewaves
…. by measuringprevious corrective waves.
261%127.2%
External Retracements
+ Helps determine the completion of a motive wave
+ Serves as potential Exit levels for trades in the direction of the larger trend
+ Serves as potential entry for contra-trend trades
Key Ratios127.2 %161.8 %200.0 %261.8 %423.6%
External Retracements
2.00
1.00
1.272
0.000
1.618
0.618
1. Identify a completedcorrection & anticipate anew impulse wave
Extensions for Exit
2. Measure corrective waveto define extension levels1
2
3
4
5
A
B
C
3. Watch for the end of correction for entry
1
2
3?
External Retracements
Corrective Waves Already Completed
Motive Waves To Study With Extensions
» Wave 2» Wave 4» Wave B» Wave X
» Wave 3» Wave 5» Wave C» Wave Y
Ext. Retracements
External Retracements Motive Wave TipQuickly access the Trading Analysis Fib ratios within the wave count
External Retracements Motive Wave TipAccess the default
Fib ratios from the components
panel
Expansions areused to measure motivewaves
…. by measuringprevious motive &corrective waves.
200%
Fibonacci Expansions
Fibonacci Expansions
+ Helps determine the completion of a Motive wave (W.1,3,5,A or C).
+ Serves as potential Exit levels for trades in the direction of the larger trend, or entry levels against the trend.
+ Serves as potential entry on counter-trend trades
Key Ratios38.2 %61.8 %
100.0 %161.8 %200.0 %261.8 %423.6%
1
2
3
4
5
A
B
C
Fibonacci Expansions
1. Identify a completedMotive & Correction &anticipate a new 5-wavemotive.
Expansions for Exit
2. Measure (click) the 3 end points of the Motive& Corrective Wave.
3. Watch for the end of the Motive wave at Expansions ratios for exit.
Click 1
Click 2
Click 3 0.000
0.618
1.000
1.618
Corrective Waves Already Completed
Motive Waves To Study With Extensions
» Wave 1,2» Wave 3,4» Wave 1-3» Wave A,B» Wave W,X» Any 2 adjacent waves
in a triangle
» Wave 3» Wave 5» Wave 5» Wave C» Wave Y» Waves C, D, E
Expansions
Expansions Motive Wave TipQuickly access the Trading Analysis Fib ratios within the wave count
Expansions Motive Wave TipAccess the default
Fib ratios from the components
panel
Building A Fib Zone
» A Fib zone is at least two Fib ratios in close proximity to each other
» Combine all Fib tools: retracements, extensions & projections to calculate a Fib Zone
» F.S.Z = Fib Support Zone – with a completed wave pattern, these are buying opportunities
» F.R.Z = Fib Resistance Zone – with a completed wave pattern, these are selling opportunities
Building A Fib Zone
