CHAPTER 6
Fibonacci Tools
So far, we have discussed price principles, price patterns, and basic candlestick charting as a means to discover higher probability trade setups. Now we move into our first advanced price charting method, known as Fibonacci Analysis. Traders use basic Fibonacci retracements to find support or resistance in a trending market, and these key prices can help uncover hidden points of potential support or resistance levels not seen using basic charting methods. Most software programs or charting web sites make Fibonacci tools available to traders, and thus increased the popularity of using even simple Fibonacci techniques.
In this chapter, we will discuss how to use Fibonacci retracements to find key support or resistance levels that may form alignment with other price levels, how to uncover hidden confluences of Fibonacci retracement levels, and how even simple Fibonacci tools can help confirm other methods of identifying price support or resistance, which leads to enhanced trade entry and exit.
WHAT IS FIBONACCI IN TRADING?
Traders in 2010 still use insights from a number series described by Leonardo Fibonacci of Pisa, an Italian mathematician from the thirteenth century as described in his book Liber Abaci (which translates as “The Book of the Abacus”). Most modern mathematics students know the Fibonacci sequence as the classic 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, and so on, where the next number in the sequence is the result of adding the prior ...
