What is Fibonacci Retrament?

Retracement Fibonacci is a technique used to predict the behavior of the financial market. It is based on a mathematical sequence known as Fibonacci's sequence or Fibonnaci number. The theory is that this sequence reflects the way the markets fluctuate and then "repair". While some sources believe that retracement fibonacci is effective, its reliability can be overvalued, especially people who sell financial advisory services. The name is a contraction Filia Bonnacio or "son Bonnacio". The sequence monitors one simple rule: Each number is the sum of the two previous numbers in the sequence. The first ten numbers in the sequence are therefore 0, 1, 1, 2, 3, 5, 8, 13, 21 and 34. There is a mathematical formula for calculating the sequence without having to go step by step the list. This formula is the basis of solving several mathematical problems.

The Ing Fibonacci penetration is a technique based on a different sequence characteristic. This is that each number is approximately 1.618 times the previous number. WITHHe writes neatly this means that each number is 61.8% of the one that follows it. In a similar way, each number is 38.2% number two along the sequence and 23.6% of three places. These three percent form the basis of the analysis under fibonacci retractions.

Someone who uses the technique draws a graph starting with extreme high and low for the monitored value, which will usually be a market index, but it can be an individual supply. These high and low will be the highest and lowest recorded numbers in the past history used for analysis and will be recorded on the graph as 100% and 0%. The analyst then draws vertical lines representing 61.8%, 38.2% and 23.6% Marks. It is important to note that this percentage concerns a gap between high and low characters; For example, they do not represent 61.8% of the higher number itself.

Theory is such that when the monitored value fluctuates up or down, often briefly turns direction when hitting one of hObjects that represent 61.8%, 38.2% and 23.6% points. In some cases, there may be an overall formula of movement in one direction, but with more temporary twists, as reached by each point. Although this formula is far from guaranteed, most of the analysis suggests that it happens too often to be only accidental. The most common explanation is that the gap between each of the points is the summary effect of the psychological reaction of investors to market movements, especially the way they seek to predict when the market will turn.