The turning point!

If you were a kid and had a banana (assuming u love bananas)

and your dearest friend asked for it

what would u do?

Option 1: You may give the whole banana to your dearest friend, i.e. 100% of it!

Option 2: You may give half of it to him/her, i.e. 50%

Option 3: You may divide the banana in two parts, one smaller and the other bigger and keep one while "sacrificing" the other. Typically this turns out to be in 60:40 ratio.

Option 4: You may give him only a small portion. Typically this turns out to be a quarter!

Option 5: You may keep the entire banana for yourself and give nothing to your friend! 0% sharing!!

Chances are that you will choose one of these options only in dividing the banana.

Why these options?

Why not more or less?

Because there is psychology behind each one of these options.

The psychology of ease.

The psychology of habit.

When you have to divide something or turn back from midway

all you can broadly remember is big psychological milestones and not every inch.

Everything seems to happen "by and large" and not randomly.

Only big and main points are easy to remember.

These typically turn out to be 100%, 60%,50%,40%,25%, 0%.

These are similar to 100%, 61.8%, 50%, 38.2%, 23.6%, 0%

known as Fibonacci Ratios!

Named after mathematician Leonardo Fibonacci of the thirteenth century.

In technical analysis, Fibonacci retracement is created by taking two extreme points (usually a major peak and trough)

on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.

Once these levels are identified, horizontal lines are drawn and used to identify possible support and resistance levels.

For reasons still not clearly known, Fibonacci ratios seem to play an important role in almost every aspect of nature, including the stock market, and can be used to determine critical points that cause the price to reverse.