Fibonacci Basics

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Seasonal tops

Fibonacci Basics

Sometimes one of the impulse waves extends. The other 2 should then be equal in time and magnitude. The Rule of Alternation This rule or principle holds that the market usually doesn’t act the same way two times in a row. Corrective patterns tend to alternate.

Fibonacci Sequence

The Fibonacci sequence is as follows: 1,2,3,5,8,13,21,34,55,89,144,… to infinity.Golden ratio known to ancient Greek and Egyptian mathematicians: 1.618 or .618. Fibonacci ratios used as retracements: .382, .50, .618. In a strong trend, a minimumre tracement is usually around 38%. In a weaker trend, the maximum percentage retracement is usually 62%.Fibonacci Time Targets Fibonacci time targets are found by counting forward from significant tops and bottoms using numbers in the Fibonacci sequence. Seasonal Cycles The seasonal cycle or pattern refers to the tendency of markets to move in a given direction at certain times of the year.

All though reasons for seasonal tops and bottoms are more obvious in the agricultural markets, virtually all markets experience seasonal patterns. One general seasonal pattern for all markets is that the penetration of the January high is considered bullish. When studying seasonal tendencies a reading of 80% is considered a strong seasonal
pattern. Anything under 65% is considered suspect. Counter-seasonal moves must be considered. When a market moves against a strong seasonal the move can be dramatic. The 28-day lunar cycle is important. Markets tend to form a trading cycle low every 4
weeks.
40 W. D. Gann: Geometric Angles and Percentages Gann placed tremendous importance on historic highs and lows a future support and
resistance areas. He was a firm believer of a 50% retracement. Geometric forms such as the circle, triangle and square greatly influenced Gann. Gann used harmonics of 360 to arrive at a time target for future market turning points. One way of arriving at Gann calendar day counts for future market turns is to count forward from significant
tops and bottoms by 30, 90, 120, 180, and 360. Those forward calendar days marked possible market turns. One of Gann’s methods for finding tops and bottoms is the squaring of price and timethat is – when a unit of price equals a unit of time. For example, Gann would take a prominent high in the market, convert that dollar figure into a calendar unit (days, weeks, months) and project that time forward.

Geometric Angles and Percentages

  • 1/8 = 12.5%
  • 2/8 = 25%
  • 1/3 = 33%
  • 3/8 = 37.5 %
  • 4/8 = 50%
  • 5/8 = 62.5%
  • 2/3 = 67%
  • 6/8 = 75%
    7/8 = 87.5%
  • 8/8 = 100%

Gann’ geometric angles are trendlines drawn from prominent tops or bottoms at specific angles. Those angles are determined by the relationship between price and time. Gann’s most important angle is 45 degrees. The Importance of the 45 Degree Angle The 45-degree angle represents Gann’s major up and down trend line. A bull market is in force as long as prices are above the rising line. A bear market is in force as long as prices remain below the declining line. The following table shows the various angle lines in decending order with their degree equivalents. The first number represents time and the second price. Read as time x price.

  1. 1 x 8 = 82.5 degrees
  2. 1 x 4 = 75 degrees
  3. 1 x 3 = 71.25 degrees
  4. 1 x 2 = 63.75 degrees
  5. 1 x 1 = 45 degrees
  6. 2 x 1 = 26.25 degrees
  7. 3 x 1 = 18.75 degrees
  8. 4 x 1 = 15 degrees
  9. 8 x 1 = 7.5 degrees
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