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Understand & Use Fibonacci Ratio’s

Part.1
Basic Ratios
by Sunil Mangwani

www.fibforex123.com

fibforex123.  www. 2. 34.Fibonacci ratios • Fibonacci ratios are a very popular tool among technical traders and are based on a particular series of numbers identified by mathematician Leonardo Fibonacci in the thirteenth century. 13. 1. • The Fibonacci sequence of numbers is as follows: 0. 1.  • One of the remarkable characteristics of this numerical sequence is that each number is approximately 1. • Each term in this sequence is simply the sum of the two preceding terms and sequence continues infinitely. 21.618 times greater than the preceding number. 8. 144. • This common relationship between every number in the series is the foundation of the common ratios used in retracement studies. etc. 5. 3.com . 89. 55.

6179.fibforex123. and 55/89 = 0.3819.6153.also referred to as "the golden ratio" or "the golden mean" . www. • The 23. For example: 8/13 = 0. • The 38. For example: 55/144 = 0.8% .The Golden ratio • The key Fibonacci ratio of 61.2352.6% ratio is found by dividing one number in the series by the number that is three places to the right. For example: 8/34 = 0.com .is found by dividing one number in the series by the number that follows it.2% ratio is found by dividing one number in the series by the number that is found two places to the right.

and can be used to determine critical points that cause price to reverse.Fibonacci ratios in the markets • For some reason.com .fibforex123. just as they do in nature. and price reacts at these levels simply because a majority of traders are following the ratios. www. • Price has an uncanny way of respecting Fibonacci ratio’s. Hence one can use the Fib ratios to ascertain the correct technical levels. • Frankly there is nothing magical about these numbers. these ratios seem to play an important role in the financial markets. often quite precisely.

each ratio should be used in a particular situation. www. • Using these ratios in a proper way gives us a tremendous advantage over the crowd.com .The proper use • Another common mis-interpretation of the Fibonacci numbers is that traders tend to use the same Fibonacci ratio for all kinds of situations. • Just like the different tools in a carpenter’s tool box. • While you obviously cannot use a hammer for a job that requires a screw driver. • Let us have a detailed look at the different Fibonacci ratios and their uses for the correct situations. similarly you cannot use Fibonacci retracements in a situation where the Fibonacci fans are required.fibforex123.

com . If the market is moving up and making new highs.Fib retracements and projections – Fib retracements – • The basic use of Fibonacci retracements is to find potential levels of support or resistance “behind” the market. Fib retraces will draw levels BELOW the current price.fibforex123. Ideal situation to use in – • To estimate the horizontal levels of support/resistance for a pullback in an existing trend. www.

fibforex123.com .Example of Fib retracements – www.

using the last prominent moves. • Thus we are projecting the price action forward.Fib projections – • The Fibonacci projections are used to determine the expected price targets. estimating that it will reach the fib levels.com . once it has crossed the Fibonacci retracement levels. we can use the last prominent down wave to determine the expected upside targets. We project the price action forward.fibforex123. • If we are anticipating price to begin an uptrend. www. Ideal situation to use in – • For estimating the price targets after the pullback is completed.

fibforex123.Example of Fib projections – www.co m .

Elliot waves – Go hand in glove with Fib retracements & projections. www.com . The waves adhere to these ratios quite accurately.fibforex123.

com .Fib Expansions – • The fib expansions determine where prices could potentially move to.fibforex123. The advantage is that these levels are drawn “front” of the market. www. Ideal situation to use in – For estimating the price objectives of a 1-2-3 pattern.

Example of Fib expansions – www.com .fibforex123.

) For price in an existing trend .Fib Fans – • The Fibonacci fans are diagonal lines that use Fibonacci ratios to help identify key levels of support and resistance.com . and we need to determine the extent of this pullback.) To determine the future levels of support/resistance 2. Ideal situation to use in – 1.fibforex123.when price pulls back. www.

com . www.Example of Fib fans – To determine the future levels of support/resistance.fibforex123.

www.fibforex123.com .Example of Fib fans – To determine the extent of a pullback.

but also implement the knowledge in the live market.com shellcon@eth.fibforex123.net www. • We don’t just teach. www.fibforex123.com Please feel free to contact me about further information at: sunil@fibforex123.End • I hope this presentation can help you gain that extra ‘Edge’ over the market. • Visit my website for more educational and practical information on the correct use of technical analysis.com .

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