The Fibonacci numbers is a theory, named after an outstanding Italian mathematician of the XII-XIII centuries, which affords to use numerical coefficients (Fibonacci numbers), which, in their turn, play an important role in forecasting the market movement. Fibonacci developed a numerical row (Fibonacci series), which contains the consequence of the numbers:
'1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, 4181 and so on.'
They are connected by constant relations, in particular, the ratio of any number to the consequent number of the row, which asymptotically approaches to 0.618, and the ratio of every member of the sequence to the prior member, which asymptotically approaches to 1.618 (Fibonacci coefficients or Golden Ratio).
Golden ratio is observed in many objects and acts of nature, starting from the mollusk shell finishing by the form of hurricane whirls and the galaxy.
On the financial markets, Fibonacci numbers are used diversely, they are the instruments of price target forecasting and calculating stop-loss level of the loss-making position. For example, trend correction, according to Fibonacci number 0.618, is usually expected at the level 61.8% of the prior price change, which allows the investor to setup the stop loss a little bit lower, than this level. Due to this, if the correction happens at the level, which exceeds the expected one, the investor will avoid excessive losses. On the other hand, if the correction approximately reaches the price level, the result will increase the possibility, that the interpretation of the price movement, chosen by the investor, appears to be correct.
'1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, 4181 and so on.'
They are connected by constant relations, in particular, the ratio of any number to the consequent number of the row, which asymptotically approaches to 0.618, and the ratio of every member of the sequence to the prior member, which asymptotically approaches to 1.618 (Fibonacci coefficients or Golden Ratio).
Golden ratio is observed in many objects and acts of nature, starting from the mollusk shell finishing by the form of hurricane whirls and the galaxy.
On the financial markets, Fibonacci numbers are used diversely, they are the instruments of price target forecasting and calculating stop-loss level of the loss-making position. For example, trend correction, according to Fibonacci number 0.618, is usually expected at the level 61.8% of the prior price change, which allows the investor to setup the stop loss a little bit lower, than this level. Due to this, if the correction happens at the level, which exceeds the expected one, the investor will avoid excessive losses. On the other hand, if the correction approximately reaches the price level, the result will increase the possibility, that the interpretation of the price movement, chosen by the investor, appears to be correct.
