Fibonacci Spiral
Tue, Apr 15The Fibonacci spiral is formed by drawing circular arcs that connect the opposite corners of squares in the Fibonacci tiling, resulting in a radius that increases in proportion to the Fibonacci ratio.
The primary concept of utilizing the Fibonacci spiral in technical analysis involves establishing the initial radius as the distance between two significant extremum points on the chart. When this distance is accurately selected, the intersections of the spiral with the price plot are believed to indicate crucial price and time targets.
Fibonacci spirals create an ideal connection between price and time analysis, providing a solution to the long-standing challenge of forecasting both time and price. Each point on the spiral represents an optimal combination of price and time.
Market corrections and trend reversals tend to occur at the notable points where the Fibonacci spiral intersects its growth path through price and time.
You may be surprised to find that if the correct center is identified, Fibonacci spirals can accurately pinpoint market turning points with a precision rarely seen before.
Investing based on spirals is neither a black-box strategy nor an overly complex computerized trading system. Instead, it is a straightforward universal geometric principle applied across various products, including futures, stock index futures, stocks, and cash currencies.
The Fibonacci spiral is one of several Fibonacci studies used to analyze markets in terms of support and resistance levels for a specific asset's price.
Unlike many other Fibonacci studies, the precise methods for calculating Fibonacci spirals are somewhat secretive.
The fundamental idea behind the Fibonacci spiral is to select a specific extreme point on a market chart as the spiral's center, from which a Fibonacci spiral based on the golden ratio is drawn outward.
Specific points along the spiral are then regarded as strong indicators of market events, such as price spikes or significant levels of resistance or support.
Proponents of the Fibonacci spiral consider it an exceptionally accurate method for predicting market behavior based on both critical times and key price levels, rather than solely on price levels.
In general, Fibonacci spirals are created by selecting a starting point and then progressively increasing the width of points along the spiral from the center by multiplying the width by a Fibonacci ratio for each quarter turn.
In market contexts, this Fibonacci ratio is likely determined by specific price levels within the market.
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