TAILIEUCHUNG - Forex On-Line Manual For Successful Trading Chapter 6

CHAPTER 6 Fibonacci Analysis and Elliott Waves Theory. . Fibonacci Analysis. The Fibonacci analysis gives ratios which play important role in the forecasting of market movements. This theory is named after Leonardo Fibonacci of Pisa, an Italian mathematician of the late twelfth and early thirteenth centuries | CHAPTER 6 Fibonacci Analysis and Elliott Waves Theory . Fibonacci Analysis The Fibonacci analysis gives ratios which play important role in the forecasting of market movements. This theory is named after Leonardo Fibonacci of Pisa an Italian mathematician of the late twelfth and early thirteenth centuries He introduced an additive numerical series - Fibonacci sequence. The Fibonacci sequence consists of the following series of numbers 1 1 2 3 5 8 13 21 34 55 89 144 233 377 610 987 1597 2584 4181 etc. which exhibit several remarkable relationships in particular the ratio of any term in the series to the next higher term. This ratio tends asymptotically to the Fibonacci ratio . In addition the ratio of any term to the next lower term in the sequence tends asymptotically to which is the inverse of . Similarly constant ratios exist between numbers two terms Golden spirals appear in a variety of natural objects from seashells to hurricanes to galaxies. The financial markets exhibit Fibonacci proportions in a number of ways particularly it constitute a tool for calculating price targets and placing stops. For example if a correction is expected to retrace percent of the preceding impulse wave an investor might place a stop slightly below that evel. This will ensure that if the correction is of a larger degree of trend than expected the investor will not be exposed to excessive losses. On the other hand if the correction ends near the target level this outcome will increase the probability that the investor s preferred price move interpretation is accurate. FOREX. On-line Manual For Successful Trading 95 . The Elliott Waves Basics of Wave Analysis The Elliott waves principle is a system of empirically derived rules for interpreting action in the markets. Elliott pointed out that the market unfolds according to a basic rhythm or pattern of five waves in the direction of the trend at one larger scale and three waves against that trend. In a .

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