| Leonardo Fibonacci. 13th century Italian | | | | Take a look at the daily stock chart for any |
| mathematician. Brilliant guy. And also highly observant. | | | | upwards-trending stock. Notice how every so often |
| One day he was minding his own business when he | | | | the price dips and then finds a new footing and goes |
| suddenly noticed a pattern in a snail's shell. It seemed | | | | on to make a new higher high? All along the trend |
| so perfect mathematically that he began doing | | | | upwards you can see these periodic dips and |
| measurements. And soon thereafter he had worked | | | | recoveries. |
| out the formula. He then set about looking for other | | | | Now, finding an upwards-trending stock is no problem |
| examples in nature where this formula could be | | | | (well, OK, it's a bit tougher nowadays but you can still |
| applied and he discovered that it was literally | | | | find them). What if you could predict the point at |
| everywhere. | | | | which the next dip will find support and fall no |
| The Fibonacci Series | | | | further? Wouldn't that be an excellent place to get |
| Thus was born the Fibonacci series: | | | | into that stock? |
| 0,1,1,2,3,5,8,13,21,34,55,89,... | | | | Enter Fibonacci and his magic series. |
| See the pattern? It begins with 0 and 1 and then | | | | By All Means Kids, Try This at Home |
| each number in the series after that is the sum of | | | | If you measure the distance (in price) from the start |
| the 2 numbers preceding it. | | | | of a move up off the last pullback to the high it |
| OK, so what? | | | | eventually reached, then you will find that very |
| Well, if you divide any of the numbers by the | | | | frequently price will pull back 0.618 times that distance |
| number that follows it, the higher along the series | | | | and find support (buyers) right there. |
| you go the closer that result is to 0.618. Try it. Start | | | | Un-freeking-believably cool. |
| with say 8 divided by 13. Now do 55 divided by 89. | | | | A Whole New Science to This |
| See what I mean? | | | | As it turns out, 0.618 is not the only important ratio. |
| Great. But again, so what? | | | | Others have been developed off the Fibonacci series |
| Ratios Found in Nature | | | | and utilized very effectively in technical analysis. This |
| Well, as Fibonacci discovered, this 0.618 ratio can be | | | | approach can be applied to the charts of any financial |
| found all throughout nature. The ratio of the distance | | | | instrument, stocks, bonds, futures, anything. |
| between one tree ring and the next, the ratio of the | | | | An excellent book on the subject has been written |
| distances between one line on a snail's shell and the | | | | by one Joe DiNapoli. If you are interested in exploring |
| next, and so on. It is literally found everywhere. | | | | this, then I suggest you Google him and check out |
| It can even be found, wait for it,... in the financial | | | | his info. |
| markets. | | | | Happy trading! |
| Ratios Found in the Markets | | | | |