Fibnocci Retracement Tool Tutorials in Tamil | Aravinth yohan ,
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Tools derived from the Fibonacci number sequence are among the most effective in the field of Forex technical analysis. This is unsurprising, as they can show key inflection points where price is likely to reverse. Forex Fibonacci levels are widely used by retail Forex traders as well as by the traders at major banks and hedge funds. The article represents how to use Forex Fibonacci retracements in your trading. We’ll explore the origins of the numbers and show how to apply Forex Fibonacci levels on your charts.
Who is Fibonacci? Introduction of the Liber Abaci
Born in Pisa around 1170, Leonardo Pisano is better known by his nickname Fibonacci. He was educated in North Africa, travelled widely and studied different numerical systems and methods of calculation. At the time the Roman numeral system was most popular, but Fibonacci recognised the enormous advantages of the mathematical systems used in the countries he visited. He started working on the new system and presented it in his famous book ‘Liber Abaci’ in 1202. He introduced the modus Indorum (method of the Indians), today known as the Hindu–Arabic numeral system.
It made a profound impact on European thought because making arithmetical operations with Arabic numerals was far quicker and more efficient than the old Roman system. The book was widely copied and drew the attention of the Holy Roman emperor Frederick II, who granted a salary to Fibonacci in recognition for the services he had given.
The book comprises three sections, the first covering numbering from 0 to 9, as well as positional notation. He showed the practical use of the numeral system by applying it to commercial book-keeping, interest calculation, money changing and similar topics. The second section deals with a range of issues faced by merchants such as goods pricing, profit calculation and currency conversion. The author is mostly famous for the Fibonacci numbers and the Fibonacci sequence, which are introduced in the third section.
The Fibonacci sequence is a series of numbers where each number is equivalent to the sum of the two numbers previous to it. 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144… and on to infinity.
This sequence ties directly into the ‘golden ratio’, because if you take any two successive Fibonacci numbers, their ratio is very close to 1.618. Hence this figure 1.618 is called ‘phi’ or the golden ratio.
The golden ratio appears frequently in nature, architecture, fine art, biology and even the financial Forex markets. Examples of where the golden ratio occurs include the Great Pyramid of Giza, Leonardo da Vinci’s Mona Lisa, nautilus seashells, spiral galaxies, sunflowers, tree branches, beehives and human faces.
Introducing Forex Fibonacci in the Markets
You will see the 61.8%, 38.2%, 23.6% Forex Fibonacci levels being used most commonly in the financial markets. These numbers are not directly from the sequence, they are derived from mathematical relationships between numbers in the sequence.
- The basis of the 61.8% ratio comes from dividing a number in the Fibonacci series by the number that follows it. For example: 34/55 = 0.6181.
- The 38.2% ratio is derived from dividing a number in the Fibonacci series by the number two places to the right. For example: 34/89 = 0.3820.
- The 23.6% ratio is derived from dividing a number in the Fibonacci series by the number three places to the right. For example: 34/144 = 0.2361.