Financial Technical Analysis Crypto Narrative Chapter 6 Fibonacci Golden Ratios
It is stated in many investing and trading articles that Fibonacci golden ratios are used to find hidden supports and resistances. The most frequently used Fibonacci tools in trading are Fibonacci retracement and extension or expansion. Fibonacci retracement is used to predict how much a corrective phase will or the term most cryptocurrency supporters, how far will the dip be. Fibonacci extension is used to predict how low the bottom will be and on the other side, how high the top will be. Before directly discussing Fibonacci golden ratios for financial technical analysis, we will summarize the theory behind Fibonacci golden ratios.
The Fibonacci Numbers
In mathematic, Fibonacci are magic numbers. In natural science, Fibonacci numbers appears very frequently such as the number of leaves in plants and the number of petals in flowers as stated in Laura Resta’s thesis in biomathematics entitled The Fibonacci sequence in phyllotaxis. We can see the above image of 1,2,3,5,8,13 where the sequence are based on the sum of the previous two numbers (3=1+2, 5=2+3, 8=3+5, 13=8+5) founded by Leonardo Fibonacci. Now that I learned Fibonacci sequences, I no longer use 20, 50, 100, and 200 days when using moving average technical indicator, I used the numbers from the Fibonacci sequence now which are 21, 34, 55, 89, 144, 233, and 377 days moving average.
The Fibonacci Golden Ratios
Even as I was taking my trading course, I did not know the concept behind Fibonacci golden ratios. I only have to memorize these numbers 23.6%, 38.2%, 61.8%, 78.6%, 100%, 161.8%, 261.8%, and 423.6%. Now that I am writing this chapter, I have to dig in some background about these golden ratios. The most popular golden ratio is 61.8% (0.618) and 161.8% (1.618) where they can be found in flowers, shells, other natures, and even our faces. The images above are from Kaya KS, Türk B, Cankaya M…