Fibonacci Sequence and Technical Analysis

The Fibonacci sequence is extensively used in technical analysis by almost all . in the initial observation it may sound far fetched that nature and along with it the natures gift , the human mind , and mathematics are closely linked together. However the fibbonacci sequence does play a part in some cases in nature and also the stock markets. The point where enthusiasts go wrong is in their zeal to find the absolute truth and sure shot methodology in the stock markets. Incidentally the Fibonacci sequence is used extensively in Elliot wave theory.

To understand the fibbonacci numbers and its examples in nature, below is the simple calculation-

Each number in the sequence is the sum of the two numbers that precede it. So, the sequence goes: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, and so on. The ratio of the numbers in the sequence approaches the golden ratio. (1.618)

Now this golden ratio , so it is claimed , is found in every aspect of nature. It is also said to influence the mass human psychology.

We have found that it does come true in many instances . However one cannot justify each and every thing in nature or the mass movements by Fibonacci sequence.

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