Technical Analysis Plain and Simple: Charting the Markets in Your Language, Second Edition

Fibonacci Retracements

Many years ago, mathematicians discovered that a certain number kept appearing throughout the natural world. It was the ratio describing how flower petals grew around their central stem, how a snail’s shell swirled around its origin, and how a galaxy extended from its core. For the financial community, this ratio described how consecutive numbers related to each other. This “golden ratio” of .618 was applied to numbers by the 13^th-century mathematician Leonardo Fibonacci. Fibonacci numbers are really one aspect of trading with Elliott Waves and Gann Angles, but those are topics for more advanced books.

The Fibonacci sequence starts like this:

1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144,…,

where any number in the sequence ...