Fibonacci is a mathematical sequence and a popular technical analysis tool used in investing and trading. The Fibonacci sequence is a series of numbers in which each number is the sum of the two preceding numbers (0, 1, 1, 2, 3, 5, 8, 13, 21, etc.).
In investing and trading, Fibonacci ratios and retracements are used to identify potential areas of support and resistance in an asset's price chart. Fibonacci ratios are ratios derived from the Fibonacci sequence, such as 0.236, 0.382, 0.5, 0.618, and 0.786. These ratios are commonly used as potential areas of support and resistance where an asset's price may experience a reversal or consolidation.
Fibonacci retracements are lines drawn on an asset's price chart that represent levels of potential support or resistance based on the Fibonacci ratios. Traders use these retracements to identify potential buying or selling opportunities, as well as to determine where to set stop-loss orders to manage risk.
Fibonacci extensions are another technical analysis tool that uses Fibonacci ratios to identify potential price targets for an asset's price. These extensions are drawn on an asset's price chart to project potential price levels beyond its current trend.
The Pattern Finder Fibonacci retracements and extensions use the year high and year low as the swing for all time frames.
Fibonacci time zones are a tool used to identify potential reversal points based on the length of time it takes for an asset's price to move from one significant low to another. These time zones are drawn on an asset's price chart to identify potential areas of support and resistance based on the Fibonacci sequence.
The year low is always the basis from which the Fibonacci retracements and extensions are drawn.
The year high low range is the value that is used for the Fibonacci multipliers.
In summary, Fibonacci is a mathematical sequence and a popular technical analysis tool used in investing and trading. Fibonacci ratios and retracements are used to identify potential areas of support and resistance in an asset's price chart, while Fibonacci extensions and time zones are used to project potential price targets and identify potential reversal points based on the length of time an asset's price takes to move from one significant low to another.
We create both positive retracement levels for a bullish thesis and negative retracement levels for a bearish thesis.
This is unique to Pattern Finder, and differs from how many mainstream tools generate these levels.