What is Fibonacci Ratios?
The Fibonacci ratios are used as a guide for determining support and resistance levels for financial assets,
such as stocks, commodities, and, you guessed it, currencies in forex trading.
Fibonacci ratios are mathematical relationships, expressed as ratios, derived from the Fibonacci sequence.
The Fibonacci sequence is named after Leonardo of Pisa, who was known as Fibonacci (a contraction of filius Bonacci, which means "son of Bonaccio").
The Fibonacci numbers are the numbers in the following sequence:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144... etc.
The first two Fibonacci numbers are 0 and 1, and each subsequent number is the sum of the previous two.
The key Fibonacci ratio of 0.618 is derived by dividing any number in the sequence by the number that immediately follows it. For example: 8/13 is about 0.6154, and 55/89 is approximately 0.6180. The further out you go in the sequence, the closer the ratios will converge to the reciprocal of the golden ratio, which is approximately 0.618.
Likewise, the 0.382 ratio is found by dividing any number in the sequence by the number that is found two places to the right. For instance: 34/89 is approximately 0.3820. The limit of convergence in this case is the square of the golden ratio, which is around 0.382.
The 0.236 ratio is found by dividing any number in the sequence by the number that is three places to the right. For example: 55/233 is approximately 0.2361. The limit of convergence is now the cube of the reciprocal of the golden ratio, which is approx. 0.236.
The 0.500 ratio is derived from dividing the number 1 (third number in the sequence) by the number 2 (forth number in the sequence).
And, finally, the 0.764 ratio is the result of subtracting 0.236 from the number 1.
Good stuff, huh?
Fibonacci ratios are mathematical relationships, expressed as ratios, derived from the Fibonacci sequence.
The Fibonacci sequence is named after Leonardo of Pisa, who was known as Fibonacci (a contraction of filius Bonacci, which means "son of Bonaccio").
The Fibonacci numbers are the numbers in the following sequence:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144... etc.
The first two Fibonacci numbers are 0 and 1, and each subsequent number is the sum of the previous two.
The key Fibonacci ratio of 0.618 is derived by dividing any number in the sequence by the number that immediately follows it. For example: 8/13 is about 0.6154, and 55/89 is approximately 0.6180. The further out you go in the sequence, the closer the ratios will converge to the reciprocal of the golden ratio, which is approximately 0.618.
Likewise, the 0.382 ratio is found by dividing any number in the sequence by the number that is found two places to the right. For instance: 34/89 is approximately 0.3820. The limit of convergence in this case is the square of the golden ratio, which is around 0.382.
The 0.236 ratio is found by dividing any number in the sequence by the number that is three places to the right. For example: 55/233 is approximately 0.2361. The limit of convergence is now the cube of the reciprocal of the golden ratio, which is approx. 0.236.
The 0.500 ratio is derived from dividing the number 1 (third number in the sequence) by the number 2 (forth number in the sequence).
And, finally, the 0.764 ratio is the result of subtracting 0.236 from the number 1.
Good stuff, huh?