Fibonacci Numbers and Golden Ratio

Fibonacci Numbers and Golden Ratio

        For those who are not already familiar with the name Fibonacci, you may remember hearing something about it in 2006, when the movie The DaVinci Code appeared in theaters. When Jacques Saunière was found murdered at the Louvre Museum in Paris, the strange position that this deceased character was placed in mimicked the famous painting of the Vitruvian Man by Leonardo da Vinci. This painting has been known to illustrate how Fibonacci ratios appear in the human form. The film also piqued the curiosity of some people when the characters in the film started talking about Fibonacci numbers as part of a clue or code of some sort. For myself, I only chuckled and thought, “It’s about time someone is taking Fibonacci seriously.”    

     The Fibonacci number series and the properties of this series were made famous by the Italian mathematician Leonardo de Pisa. The Fibonacci number series starts with 0 and 1 and goes out to infinity, with the next number in the series being derived by adding the prior two. For example, 55 + 89 = 144, 89 + 144 = 233, 144 + 233 = 377, and so on (see the following number series): 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987 . . . out to infinity What is most fascinating about this number series is that there is a constant found within the series as it progresses toward infinity. In the relationship between the numbers in the series, you will find that the ratio is 1.618, or what is called the Golden Ratio, Golden Mean, or Golden or Divine Proportion. (For example, 55 x 1.618 = 89, and 144 is 1.618 times 89.) Take any two consecutive numbers in the series after you get beyond the first few and you will find the Golden Ratio. Also note that the inverse or reciprocal of 1.618 is 0.618. There are quite a few Web sites that are devoted to this number series and its properties. Just type the word Fibonacci into your favorite search engine and you’ll be amazed at the wealth of information that exists on this subject. The Golden Ratio can be found in many different places.

        The 1.618 ratio is used in architecture in what is called the “golden rectangle,” as it is known to be pleasing to the eye. There are actually plastic surgeons who use these ratios to help them sculpt faces of “perfect proportion.” You can also find the ratio in nature. It can be seen in flowers, the nautilus shell, ammonite fossils, and many other places. What I find to be most fascinating is that this ratio shows up in the pentagram , which is known as a symbol for hidden occult knowledge. It occurred to me that maybe the ratio within the pentagram held a hidden secret to the market! At one point in my education,

     I actually studied Jewish mysticism. One of my teachers from a Golden Dawn temple in California handed me a copy of a Disney cartoon called “Donald in Mathmagic Land,” saying that I might enjoy it. Another student had brought it to his attention, as Donald Duck had a pentagram inscribed on his hand in this Disney cartoon. In this cartoon, which was produced to teach children about math, Donald Duck was on an adventure in Mathmagic land, where he visited with Plato and Pythagoras, talked about “secret mathematical societies,” and learned about the Golden Section.

     The cartoon illustrated where the ratios of 0.618 and 1.618 exist in nature and architecture. This cartoon, which Disney released in 1959, is still available via the Internet, and it is well worth watching. The quote at the end of the cartoon was from Galileo, “Mathematics is the alphabet in which God has written the universe.” I believe this to be true. If you study the “code” of the Fibonacci numbers and the ratios derived from this number series long enough, I think you will begin to agree with, or at least understand, that statement. This is not something that should just be blindly accepted because I have found it to be true. It is something that you must discover and then prove to yourself on your own journey! What is important to most traders is that applying these ratios can help identify key support and resistance zones in the market, and therefore determine key trading opportunities or setups. I will show you how to apply these ratios in any market with adequate data. Thus, the application can give you a huge edge as a trader, if you use the techniques properly

you must need to read to be a good Forex trader 

step 1        Applying fibonacci ratios to the price axis ot the market

step 2        Fibonacci Price Retracements

step 3     Fibonacci Price Extensions

step 4     Fibonacci Price Projections or Objectives

step 5     Fibonacci Price Cluster Setups: Trade Setup 1

step 6      Symmetry—The Power Tool: Trade Setup 2

step 7    The Two-Step Pattern Setup: Trade Setup 3

step 8      Triggers and Indicators

step 9    The Ideal Trade Setup

step 10  From Analysis to Trade Entry—Putting It All Together