Fibonacci numbers are part of the Fibonacci sequence, where the two previous numbers are added together to calculate the next number in the sequence. The ratio of two Fibonacci numbers is the Golden Ratio, or 1.61803398875, which has been used since ancient times as the perfect proportion in architecture and other design. The Golden Ratio is also known as Phi (pronounced “fee”). Because Fibonacci numbers are found throughout the natural world, they have been integrated into some traders’ strategies for market analysis.

Modern computing power has uncovered plentiful examples of the Golden Ratio in nature, from Nautilus shells to musical harmonics, as well as in mathematical fractal patterns. Fibonaccii numbers are related to the study of chaos theory, which seeks to find order in complex systems. Since the markets have so many variables, but no lack of data, they are an excellent place to search for Fibonacci patterns.

Many traders use Fibonacci Retracements to predict or interpret the swings of the market, and many compelling examples exist of Fibonacci retracements seeming to indicate where trends would start and stop.

Retracements are defined as points where a strong trend “retraces its steps” and is momentarily set back by a smaller reverse trend before continuing the previous stronger trend. The theory behind Fibonacci Retracements is that complex systems will exhibit orderly behavior to some extent. The so-called random walk of stock prices has been shown to fit on occasion into the parameters of Fibonacci lines and arcs.

The use of Fibonacci numbers in trading is still in its early stages, but ever-growing computing power available to traders increases their ability to find the common threads that will make this investment theory more usable, accurate, and reliable. These include artificial intelligence services from Tickeron, which provide traders with powerful ways to evaluate trade ideas, analyze signals, and provide key confirmation to help investors make rational, emotionless, and effective trading decisions.

What is Asset Turnover?

Asset Turnover is a ratio of the value of a company’s sales or revenues relative to the value of its assets

What is Investment Interest Expense?

Investment interest expense is the term for interest which has been paid in order to hold an investment position

What is the Broadening Wedge Ascending (Bearish) Pattern?

The Broadening Wedge Ascending pattern forms when a stock price progressively makes higher highs and higher lows

What is Profit and Loss (P&L) Statement?

A Profit and Loss Statement, also referred to as an “income statement,” is a corporate statement for an exact time period

What is the Federal Reserve Bank?

The Federal Reserve Bank is a 12-bank system in the United States that plays the role of the country’s central bank

What is a commodities futures contract?

Commodities Futures are one of the most highly traded securities in the world. There are trillions of dollars in trades

What does it mean to 'exercise an option?'

An options contract starts when the option is exercised, meaning that the option or buy or sell the security is utilized

What was the "Flash Crash"?

On May 6, 2010, investors around the world were shocked when the Dow Jones fell nearly 1,000 points in a matter of minutes

What Happens When a Company Goes Bankrupt?

There is a hierarchy of which creditors and investors will be serviced first in the event that a company goes bankrupt

What is dollar cost averaging?

Dollar cost averaging (DCA) is a method of hedging against the risk of investing a lump sum at high market prices