Exness Forex Broker Review: Is It Reliable? Pros and Cons
Investment and Financial Freedom › Exness Forex Broker Review: Is It Reliable? Pros and Cons
Fibonacci: the magical sequence of numbers found both in nature and in investing. The Fibonacci Sequence is created by adding the two previous numbers together, starting from 0 and 1 — for example: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, ... The sequence was named after Leonardo Fibonacci, an Italian mathematician who introduced it to the Western world in the 13th century.
History
The story of the Fibonacci sequence began with a mathematical problem about rabbit population growth. Fibonacci observed that the number of rabbits in each generation followed a specific pattern — the same sequence he discovered.
The Golden Ratio
An interesting property of the Fibonacci sequence is that dividing a number by the next number in the sequence produces a value that approaches a constant called the Golden Ratio, approximately equal to 1.618. This ratio appears frequently in nature — in seashells, flowers, galaxies, and even in the proportions of the human body.
Applications
The Fibonacci sequence and the Golden Ratio have been applied in many fields — from art and design to science and investing.
- Art and Design: Artists and designers use Fibonacci principles to create balance and natural beauty in their works.
- Science: Scientists use Fibonacci patterns to study natural phenomena such as plant growth, planetary motion, and molecular structures.
- Investing: Traders use Fibonacci ratios in technical analysis to predict market trends using Fibonacci retracement levels — which represent potential support and resistance areas.
Using Fibonacci in Investment Analysis
- Fibonacci Retracement: A tool for identifying potential price reversal levels by drawing lines between a high and low point and dividing the distance into Fibonacci percentages (23.6%, 38.2%, 50%, 61.8%, 100%).
- Fibonacci Extension: Used to forecast target price levels after a breakout beyond support or resistance.
- Fibonacci Fan: Trend lines drawn from a key point at angles determined by Fibonacci ratios.
Note: Fibonacci tools are only one part of technical analysis. They do not guarantee investment results and should be used alongside other analytical methods and fundamental factors.
Summary: The Fibonacci sequence is a fascinating mathematical phenomenon with practical applications across many fields, including investing. Understanding Fibonacci principles can give investors valuable insights into market behavior.
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