Fibonacci, a mathematician from the early thirteenth century, discovered a series of mathematical figures which plays a key role in the cyclical phenomena generally. The Fibonacci series is calculated as follows: U (n) = U (n-1) + U (n-2)
Thus, the first numbers are 1, 1, 2, 3, 3, 5, 8, 13, 21, 34, 55, 89, 233, etc..
This suite has remarkable characteristics:
- When n tends to infinity, the ratio of two consecutive numbers tend to 1.618 which is the gold number of mathematicians or 0.618, it’s opposite, the ratio of gold.
- The oppposite of the gold number is the ratio of gold, their difference is 1.
- When n tends to infinity, the ratio U (n) / U (n-2) tends to 2.618 or 03.82
Estimates based on the method of Fibonacci projections admit the principle that values are changing cyclically at the rate given by the number of gold.
Method of calculation and interpretation
Fibonacci Projections in opposition with Fibonacci retracements and extensions take into account two significant trends and then reverse of the price. So we draw two segments of line, the first connecting the lowest to the highest (or vice versa) of the first trend, the second connecting the highest (or lowest) to lower (or higher) of the second trend.
The price differential between the two extremes of the first trend is the basis of calculation for projections of Fibonacci. Generally there are four levels of projection corresponding to changes in 61.8%, 100%, 161.8% and 261.8% of this differential from the end of the second trend. Horizontal lines are plotted for each level which play a role of support and resistance.
Next to a major change in the trend, the "projections of Fibonnacci" define the objectives of the magnitude of the following correction
Example
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