Friday, 21 April 2017
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How to apply fibonacci sequence in Elliott wave theory
ReplyDeleteFibonacci numbers provide the mathematical foundation for the Elliott Wave Theory. While the Fibonacci ratios have been adapted to various technical indicators, their utmost use in technical analysis remains the measurement of correction waves.
ReplyDeleteUse it for retracement and extensions.
DeleteA retracement is a move in price that "retraces" a portion of the previous move. Usually a stock will retrace at one of 3 common Fibonacci levels - 38.2%, 50%, and 61.8%. Fibonacci price retracements are determined from a prior low-to high swing to identify possible support levels as the market pulls back from a high.
Fibonacci price extensions are used by traders to determine areas where they will wish to take profits in the next leg of an up-or downtrend. Percentage extension levels are plotted as horizontal lines above/below the previous trend move. The most popular extension levels are 61.8%, 100.0%, 138.2% and 161.8%.