Leonardo Fibonacci and The Golden Ratio

Leonardo Fibonacci (1170-1250) is an Italian mathematician, founder of “the Fibonacci sequence” of numbers, where  each number is the sum of the previous two:

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987 etc.

         There are several manifestations of the so called “Golden Ratio”, which can be found through the Fibonacci sequence:

5/8≈0,618;           8/13≈0,618;         13/21≈0,618;       21/34≈0,618; etc.

8/5≈1,618;           13/8≈1,618;         21/13≈1,618;       34/21≈1,618; etc.

13/5≈2,618;         21/8≈2,618;         34/13≈2,618;       55/21≈2,618; etc.

5/13≈0,382;         8/21≈0,382;         13/34≈0,382;       21/55≈0,382; etc.

         The Golden Ratio can be very helpful on the financial markets when we compare one wave to another in a wave pattern. For example if we compare the length of wave 3 to the length of wave 1 in an impulse, or if we measure the depth of the corrective waves 2 and 4 in relation to waves 1 and 3.

Wave 2 and wave B often retrace 61.8% of wave 1 and wave A respectively.

Example:

62

 

Wave 4 often retraces around 38.2% of wave 3. Wave 3 is often 1.618 or 2.618 times the length of wave 1. Examples:

38

However, ratio analysis does not provide firm rules, only some very useful guidelines.

New to Elliott Wave?

Elliott Wave principle offers a completely new understanding of what the nature of the markets is, what drives them and what can be derived from their movement. This course is for those of you, who have been looking for an honest Elliott Wave guide, describing the method’s advantages over other trading tools, but not hiding its weaknesses.

Check Video Course    or     Check our eBook


See our Video Course
or check our eBook

Last year over 60k readers trusted EWM Interactive to help them in their trading decisions.

I’m very happy i discovered your service. Thanks so much and keep up the good work!

- Xavier N.

Just loving your analysis. Thank you so much, really wished you add some more currencies to your list You have a client for life :)

- J. Kotzee

I love the way EWM does business: response times & overall friendly demeanor are fantastic... and the prices are very fair. The trade recommendations read like like they come from a seasoned trader that is used to winning. Couldn't ask for more.

- C. Montgomery

I love the way EWM does business: response times & overall friendly demeanor are fantastic... and the prices are very fair. The trade recommendations read like like they come from a seasoned trader that is used to winning. Couldn't ask for more.

- C. Montgomery

I’m very happy i discovered your service. Thanks so much and keep up the good work!

- C. Montgomery

Just loving your analysis. Thank you so much, really wished you add some more currencies to your list You have a client for life :)

- C. Montgomery