Fibonacci, one of the most used technical indicators

Fibonacci It’s a big topic and there are a lot of different studies with weird names, but we’re going to stick to two: the fibonacci retracement and the fibonacci extension. We will talk about them in depth.

Leonardo Fibonacci was a famous Italian mathematician who had a “spark” moment and discovered a simple series of numbers that created ratios that describe the natural proportion of things in the universe. The Fibonacci sequence is derived from the following number series: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144…

This series of numbers is obtained from 1 followed by 2 and then you add 1+2 to get 3, the third number. So, adding 2+3 gives 5, the fourth number, and so on. After the first few numbers in the sequence, if you measure the ratio of any number, the next highest number is .618. For example, 34 divided by 55 equals 0.618.

levels of Recoil (Fibonacci Retracement) are 0.236, 0.382, 0.500, 0.618, 0.764

The levels of Extension of 0, 0.382, 0.618, 1.000, 1.382, 1.618

You really don’t need to know how to calculate all of this. The software has all the graphics that will do all the work for you. But it is always good to be familiar with the basic theory of these types of indicators.