Forex Beauty Kit

Mr. Fibonacci – The Story Behind Fibonacci Sequence Numbers


Jul.19.2013

Mr. Fibonacci and his technique helps you understand potential support and resistance levels, helps you find a reasonable price at which to buy or sell, and helps you with the timing for exiting your position.

Mr. Fibonacci is an Italian dude. Don’t get too excited, though. This doesn’t mean that we are done with geeky stuff and are going to learn how to impress Italian guys.

 

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Who is Mr. Fibonacci?

Although the stereotype is that Italian guys are very good at chatting up women, Mr. Fibonacci, whose real name is Leonardo Pisano Bigollo, was an ultra-geeky mathematician. In fact, his dad seemed to be so disappointed with him that he called him Bigollo, which means “good for nothing.”

Little Mr. Fibonacci traveled with his daddy to exotic places like North Africa. He remained geeky throughout his travels, and he constantly studied numbers. When he got back, his souvenirs for his friends were, obviously, numbers. Fibo is actually the one who introduced the decimal system to the West, replacing those weird-looking Roman numerals. Didn’t know that one, did you?

 

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But things didn’t end there. One day little Mr. Fibo was playing with his numbers. He started counting: 1, 2, 3, 4, 5 . . . He soon got bored with counting and started adding up the numbers. He added 1 and 2. The result was 3. Then he added 2 and 3. The result was 5. Then he added 3 and 5. The result was 8. He continued this game for hours and even ignored his mom when she shouted, “Fibo, lunch is ready!” (The accuracy of this part of the story remains under investigation.) Later he showed his mom a whole new series of numbers: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, . . . This is how he investigated the growth of the rabbit population.

Mr. Fibonacci and Rabbit Population Mr. Fibonacci and Rabbit Population

Believe it or not, the beauty of this series of numbers doesn’t end with rabbits and bunnies. After the first few numbers, if you divide any of the numbers by the succeeding number, you will get approximately 0.618. For example, 34 divided by 55 equals 0.618. If you calculate the ratio between alternate numbers, you will get 0.382. The ratio between every third succeeding number is 0.235.

Okay, please don’t stop watching yet! We’re going to stop gibbering about numbers and get back to forex trading. You just need to know that Fibo’s sequence of numbers is not important for forex analysis, but the ratios are. Also, the best news is that you don’t have to do any math. Your forex beauty kit has special magical powers that create Fibonacci retracement levels at your command.

How to Trade with Mr. Fibonacci

  1. Find a trend. The longer and stronger it is, the better.
  2. Find the button labeled “Fibonacci Retracement” on your forex beauty kit.
  3. If the trend is a downtrend, click on the highest point of the trend and drag your mouse to the lowest point of the trend.
  4. If it’s an uptrend, do the opposite. Click on the beginning of the trend (the lowest point) and drag your mouse to the highest point.
  5. You will see Fibo’s retracement levels magically appear. They are labeled 23.6%, 38.2%, 50%, and 61.8%. Yep, these are the famous ratios we talked about before.

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