technical analysis workshop series session seven fibonacci ... · pdf fileagenda •...

Technical Analysis Workshop Series

Session Seven

Fibonacci Trading – Part 1

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Agenda

• Profile

• Introduction

• Who is Fibonacci and How He Can Help You with Your Trading?

• How the Ratios (Golden Ratio) Are Derived From ?

• Fibonacci Projections and Retracements

• The Relationship among the Retracement & Extension Levels

• Types of Fibonacci Price projections

• Fibonacci Analysis is a Leading Indicator

INTRODUCTION

FIBONACCI SEQUENCEPROJECTION AND

RETRACEMENTQ & AINTRODUCTION

Profile

FM & BC MODEL DOW THEORY

• Active member of TASS

• Graduated from NTU in 1976

• 25 years of experience

• Runs Investor’s Educational Aids, a private investors club

• Part-time Lecturer of NUS Extra-mural Studies Dept (1988

to 1994) for Forex and Derivative Products Investment

Courses



Introduction

FM & BC MODEL DOW THEORY

• To the Technical Trader, the chart is nothing more than what an x-ray is to a Doctor. It shows high probably of the next move in the market.

• The main reason most traders lose money in the market is they have no idea how to make sense of all that price movement:– Where should I get in?

– Where is the safest place?

– How much can I afford to risk?

– How much will I gain?

– Should I wait a little longer?



FIBONACCI TRADING

TECHNICAL

ANALYSISFIBONACCI SEQUENCEPROJECTION AND


Who is Fibonacci and How

He Can Help You with Your

Trading ?

• Great mathematician

• Wrote "Libre Abaci” (Book

of Calculation)

• Introduced the numerical

numbers to the Romans

• Fibonacci Series: Each

number is the result of

adding together the

previous two numbers in

the sequence.

TECHNICAL

ANALYSISFIBONACCI SEQUENCEPROJECTION AND


Fibonacci Series

• The Fibonacci Series goes like this... 1, 1, 2, 3,

5, 8, 13, 21, 34, 55, 89, 144, 233, 377,… etc. all

the way to infinity.

• As you can see: each number is the result of

adding together the previous two numbers in

the sequence.…1+1=2, 1+2=3, 2+3=5, 3+5=8,

5+8=13, 8+13=21, 13+21=34, etc. all the way

to infinity.





How the Ratios (Golden Ratio) Are

Derived From ?Prev / Last Fibonacci Series Last / Prev

1

1.0000 1 1.0000

0.5000 2 2.0000

0.6667 3 1.5000

0.6000 5 1.6667

0.6250 8 1.6000

0.6154 13 1.6250

0.6190 21 1.6154

0.6176 34 1.6190

0.6182 55 1.6176

0.6180 89 1.6182

0.6181 144 1.6180

0.6180 233 1.6181

0.6180 377 1.6180

0.6180 610 1.6180

0.6180 987 1.6180

FIBONACCI PROJECTION AND

RETRACEMENT



Fibonacci Projections and

Retracements

• Fibonacci price projection and retracement

methodologies will give you foresight into the

potential upcoming moves in time and price in

the market you are currently trading whether

you trade a daily chart or five-minute bars.



Fibonacci Projections and

Retracements• To predict where the market may go in the future. To determine

turning points in advance is important for every trader.

• Fibonacci ratios are common in almost everything in nature from flowers, to the human body, seashells etc.

• Fibonacci ratios are easy to use and just as easy to calculate. You take the range from one pivot to the next and add or subtract the ratios.

• The important fact or phenomena is, the market moves in a Fibonacci Series of ratio price movements. There are rallies, retracements and extensions as well as dips, retracements and extensions.

• Ratios for Price Retracement Levels: 0.236, 0.382, 0.50, 0.618, 0.707 and 0.886.

• Ratios for Price Extension Levels: 1.272, 1.414, 1.618, 2.00, 2.236 and 2.618.



The Relationship among the

Retracement & Extension Levels

Reciprocal Square Root

4.237 0.236 0.486

2.618 0.382 0.618

2.000 0.500 0.707

1.618 0.618 0.786

1.414 0.707 0.841

1.272 0.786 0.887

1.000 1 1.000

0.500 2 1.414

0.333 3 1.732

0.250 4 2.000

0.200 5 2.236





1. Retracement

2. Extension

3. Expansion

4. Alternate





Retracements take the distance from one pivot

to the next. Preferably a #1 to a #2 pivot and

take a portion of that range that is generally

100% or less. Common ratios to calculate

retracements are 0.236, 0.382, 0.500, .0.618,

and .0.786 and 0.886.





Extensions take the range from point #1 to Point

#2 and multiplying that distance by a Fibonacci

number, add the two numbers together and

project into the future where a possible turning

point could be.





Expansions take the distance from the # 3 pivot

to the #2 pivot and then multiply that distance

by Fibonacci numbers and add that range to the

#3 pivot





Alternates take the distance between point #1

and point #2 and adding that distance to point

#3 to give you another type of projection into

the future.



Fibonacci Analysis is a Leading

Indicator

�How to calculate probable future turning points.

�Extensions and expansions for taking profits.

�Entry and exit levels, and stop placement levels.

�Where buyers are likely to support the market.

�Where sellers should be taking profits.

�Where the high probability trades are.

�Which Fibonacci levels are more likely to turn the market.

�Fibonacci use from intra-day to longer-term trading and all markets.





Q & A

THANK YOU!



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