How to use Fibonacci in trading

The Fibonacci steps relating to trades is a very special means of making markets analysis. It was Leonardo De Pisa who is very famous in the mathematics field that developed the hypothesis of the Fibonacci.

To this very time, those Fibonacci concepts are still applied in different Technical Analysis forms by traders. 1.618 is the number which represents the golden ratio. At most times, the methods of the Fibonacci is most commonly applied when identifying levels of resistance and support the Fibonacci-based methods for trading functions because they are practiced widely.

Below, is a history of the Fibonacci and how to deal in it:

Origin of the Fibonacci numbers

History has it that Leonardo de Pisa who is full named Leonardo Pisano and born at Pisa found the pattern of numbers for the Fibonacci in the year 1202. His ideas were actually from the Far East where he traveled to, although everything of the Fibonacci pattern is greatly attributed to him. He had learned the numeral system of the Hindu-Arabic which assisted him in his popular work which he had called ”Liber Abaci” and finally became the reason he was nicknamed Fibonacci. It was his works that brought about “the golden ratio.”

The Fibonacci sequence of numbers

The Fibonacci number sequences where described by Leonardo as:

0,1,2,3,5,8,13,21,34,55,89,144,233 etc.

As you count higher, you would notice the increase in the numbers by 1.618 higher than the one before it.

E.g. 144 divided by 89 is equal to 0.618.

More so, 89 divided by 55 is equal to 1.618 which is the Golden Ratio.

This Fibonacci sequence, therefore, explains that there are two major ratios which are the phi (1.618) and its’ opposite (0.618). Apart from these, another is the 0.382. It is when a number is divided by another to the right by two places that the ratio is formed. A four place move brings forth another ratio called 0.236. These four ratios are the most crucial in the technical analysis world. 