The Fibonacci sequence is being used by traders to get some indication of how the market is likely to move.
Advanced trading education sometimes involves figuring out quite strange and seemingly illogical concepts. But these could make the difference in your performance in stock trading.
Can the Fibonacci numbers help predict market moves? According to experienced analyst Martin Tillier, they apparently can, though he was skeptical when initially introduced to the concept. When you think about it, it doesn’t quite seem logical to believe that calculating major stock market levels on the basis of some mathematical sequence actually works. Can the figures thrown up by a numerical relationship affect the real world stock prices?
The Fibonacci Sequence
LiveScience defines the Fibonacci sequence as number series where you get to a number by adding the two numbers just before it. So if you start with 0 and 1, and the sequence is 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, etc. The concept has its origin in the theories of many scholars of ancient Indian mathematics, particularly Pingala in 200 BC, Virahanka in 700 AD and Hemachandra in 1150. It was introduced to the Western world by Italian mathematician Fibonacci in his book Liber Abaci in 1202.