Something happens at 61!
When you move from toe to head, at 61.8% from toe is your belly button, your "connection" to life!
When you travel from one place to another, you generally tend to take a break after 61.8% of the journey! Most of the resting places are located at 61.8% on either side of the destinations! All aeroplane halts are like that!!
If a human being's age is 100 years, he or she retires at around 58-60 and is hit with the realisation at 61.8 years!!!
If you have 10 sips from a cola canor coffee mug, you typically get the first bout of satisfaction at around 61.8% down the top! Rest is forced!
Space occupied by the white in an egg is 61.8% of the total space.
Length of the pen's cap is around 61.8% of the remaining portion.
Average length of the fingers is around 61.8% of the average length of the palm.
In a 100 marks exam, the dividing line between the the first divisioners and the rest is .....60!!! (they couldn't fix it 61.8, but they nearly did it.)
The width of your laptop's screen is around 61.8% of the length! (Otherwise it is not pleasant for normal people!)
The time between Sunset to Sunrise is around 61.8% of the duration between sunrise and sunset!
Even the Elliot Wave respects the Fibonacci retracement. It retraces 3 steps after moving 5. The 5 waves are 1.6 times 3 waves!!!
That is nature's way of maintaining dynamic balance.
Everywhere in and around you, there is this unique ratio to maintain the dynamic balance!
50% ratio is static balance. Nature needed some other ratio to maintain dynamic balance - 61.8%!
Our psychology is totally influenced by this balancing act,
and hence the recurrence of this ratio in everything associated with us.
And what is 61.8% of 61.8%?
38.2%.
Therefore, something also happens at 38.2% (61.8% of 61.8%).
And what is the 61.8% of 38.2%?
23.6%.
So......???
Something happens at 61.8%.
Surprising that these all are in the Fibonacci sequence!
Nodoubt, 61.8% is known as Golden Ratio!
This is Fibonacci magic!
How to take benefit of this revelation?
Switch on your head at every 61.8% milestone.
If nothing happens, look at the larger picture to recognize the Fibonacci drama unfolding!
Showing posts with label Fibonacci. Show all posts
Showing posts with label Fibonacci. Show all posts
Wednesday, July 28, 2010
Swing trading with Fibonacci
On 6month chart
first mark every turning point till that date.
Now, assume you go long from point A and don't know whether it will go far or not.
First, stay long till their is a turn
which incidently comes at point B.
Now, had you squared off due to fear of losing the profit midway, you would have chickened out much earlier than B.
But, who knows whether the stock can move up more even beyond point B?
May be, it will take another v-turn immedately after B and continue its dream journey up?
Who knows?
So, it is prudent to stay long, but with a stop loss.
Now, what should be that stop loss?
Here Fibonacci ratio guides us.
If you can put at stake 25% of the profits just earned
stay long with stop loss at 25% of the A-B distance below B.
Here, A-B is the reference leg.
This is based on 23.6% Fibonacci retracement.
In this case, the stop loss will be triggered and the net profit would have been locked
somewhere between B and C.
Another, smart strategy could have been to book profit immediately at the turn B and wait and watch.
Also, whether to go short after 25% fall from B is a gebuine option for professionals.
Also, had it turned up fast again after B
you should adn could have taken the long position again!
Anyhow, come to point C where nifty has taken another V turn towards up.
Now, B-C is your reference leg.
Since the retracement has taken place at around 50%, it is expected that the rally now is
a weak one.
(refer my post 'Interpreting Fibonacci Levels')
Now go long at C with C as stop loss and expecting minimum 25% of B-C length.
In this case, it crosses even the altitude of point B.
All this while, you should have been ready to book profit at 25% fall of the rise after C.
Now, the turn comes at D.
The earlier anticipation that the rally won't go very far after C has been proved right.
Hold longs till 25% of C-D leg.
In this case,
the stop loss is again triggered when you would have booked the profit.
Again, smart strategy could have been to book profit immediately at the turn D and wait and watch.
Now, you have two options after square-off.
Wait till the next turn, or
short till next turn as per Fibonacci retracement.
This way, using Fibonacci levels you can keep trading and anticipating the next move.
(If you have noticed this method is what I shared in one of my earliest posts
"Climbing the mountain with Support Hooks (Chart Practice)")
(Forget about exact percentages and decimals. Remember the concept and approximate figures)
(Also, don't use Fibonacci retracement levels for prediction only. Use it to interpret the last move to anticipate the next move.)
first mark every turning point till that date.
Now, assume you go long from point A and don't know whether it will go far or not.
First, stay long till their is a turn
which incidently comes at point B.
Now, had you squared off due to fear of losing the profit midway, you would have chickened out much earlier than B.
But, who knows whether the stock can move up more even beyond point B?
May be, it will take another v-turn immedately after B and continue its dream journey up?
Who knows?
So, it is prudent to stay long, but with a stop loss.
Now, what should be that stop loss?
Here Fibonacci ratio guides us.
If you can put at stake 25% of the profits just earned
stay long with stop loss at 25% of the A-B distance below B.
Here, A-B is the reference leg.
This is based on 23.6% Fibonacci retracement.
In this case, the stop loss will be triggered and the net profit would have been locked
somewhere between B and C.
Another, smart strategy could have been to book profit immediately at the turn B and wait and watch.
Also, whether to go short after 25% fall from B is a gebuine option for professionals.
Also, had it turned up fast again after B
you should adn could have taken the long position again!
Anyhow, come to point C where nifty has taken another V turn towards up.
Now, B-C is your reference leg.
Since the retracement has taken place at around 50%, it is expected that the rally now is
a weak one.
(refer my post 'Interpreting Fibonacci Levels')
Now go long at C with C as stop loss and expecting minimum 25% of B-C length.
In this case, it crosses even the altitude of point B.
All this while, you should have been ready to book profit at 25% fall of the rise after C.
Now, the turn comes at D.
The earlier anticipation that the rally won't go very far after C has been proved right.
Hold longs till 25% of C-D leg.
In this case,
the stop loss is again triggered when you would have booked the profit.
Again, smart strategy could have been to book profit immediately at the turn D and wait and watch.
Now, you have two options after square-off.
Wait till the next turn, or
short till next turn as per Fibonacci retracement.
This way, using Fibonacci levels you can keep trading and anticipating the next move.
(If you have noticed this method is what I shared in one of my earliest posts
"Climbing the mountain with Support Hooks (Chart Practice)")
(Forget about exact percentages and decimals. Remember the concept and approximate figures)
(Also, don't use Fibonacci retracement levels for prediction only. Use it to interpret the last move to anticipate the next move.)
Tuesday, July 27, 2010
Interpreting Fibonacci Levels
Retracement from 61.8% level
indicates strong up-rally
=================================
Retracement from 50% level
indicates a weak rally
=================================
Retracement from 38.2% level
indicates an unsustainable rally
=================================
Retracement from 23.6% level
indicates bearish pressure
=================================
Retracement from 0% level
indicates bullish pressure
=================================
indicates strong up-rally
=================================
Retracement from 50% level
indicates a weak rally
=================================
Retracement from 38.2% level
indicates an unsustainable rally
=================================
Retracement from 23.6% level
indicates bearish pressure
=================================
Retracement from 0% level
indicates bullish pressure
=================================
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.
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.
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