 |
First, did you know that Fibonacci came from Tuscany in Italy? He was born Leonardo Bonacci around 1170 A.D. He was the son of a very successful merchant/trader from Pisa and traveled often with his father to Algeria where it is said that he first showed his interest in mathematics and numbers. Until the end of the 1800’s several of his works were published under the names of Leonardo Bonacci di Pisa, Leonardo of Pisa and/or Leonardo Pisano. Fi bonacci literally means “son of Bonacci”. The Fi is the first syllable of the Latin word Filius meaning “son”, which was the naming convention used by Tuscan families in the 12 th Century. In 1852 an Italian mathematician named Baldassarre Boncompagni edited the complete works of Leonardo Bonacci. He is credited with giving Leonardo his contemporary name, Fibonacci. Fibonacci discovered 1.618 in his numerical series. It is also a number most technical traders are familiar with. It is known as The Golden Number or Phi Ø. It is an irrational number, but one with a number of unusual mathematical properties. Phi Ø is the basis for the Golden Section, Ratio and Mean. The ratio or proportion, determined by Phi Ø (1.618….) was well known to the Greeks as the “Golden Section” and to Renaissance artists as the “Divine Proportion”. Phi with an upper case "P" is 1.6180339887. Phi with a lower case "p" is 0.6180339887, the reciprocal of Phi and also Phi minus 1. What makes phi even more unusual is that it is derived in many ways and shows up in relationships throughout the universe. In addition to Fibonacci’s numerical series Phi Ø can be derived through mathematics and geometry. Phi (Ø) appears in proportions of the human body and other animals, plants, DNA, the solar system. art and architecture, music, population growth, the stock market and the bible and theology. There is an excellent web site that goes into great detail about Phi Ø. If you make the time to explore this site you will begin to understand why the Fibs have become so useful to traders of the financial markets. Understanding Phi Ø is the key to understanding how and why the Fibs work for currency traders. As Dick mentioned in his articles, we all have access to programs that calculate the Fibs for us. But how many of us really know how to calculate the Fibs? Actually, it is rather easy. Simply calculate the difference between any high and low swing. Multiply the difference by any fib number such as .382, .50, .618, .786, etc. Either add or subtract the outcome from the low or the high. You can round off odd numbers for easier figuring. For example, High - 100 Add 25 to 50 or subtract 25 from 100 and the 50% retracement is = to 75 Try calculating and drawing your own fib lines on a current chart by calculating the distance between a previous high/low swing using the above example. When done, have your computer program plot the fibs for you. They should be within +/- one to two pips depending on your rounding. Index of All Forex Trading Articles
"I feel totally empowered and humble all at the same time. If everyone learned from you guys, it might get a lot more difficult to make money in the Forex. Last week, using Chris's basic guidance I captured 300+ pips"
|
|
