The following is a technique for determining the price level of a breakthrough objectives since the previous price fluctuations. Fibonacci analysis, which is used by representatives of various sciences such as astronomy, mathematics and architecture, also plays a significant role in the design of pricing objectives in the financial markets. After working with the Fibonacci ratio in the next few years, I developed a new technique to determine the price after the breakthrough goals (up or down) the previous price fluctuations, which I call Projected Fibonacci Targets (PFT).
Introduction
Before using the PFT, it is important to understand that a breach of support levels often become resistance levels during a subsequent promotions, especially if the violation level of support coincides with the Fibonacci level of recovery.
Figure 1 shows a hypothetical example of the price movement downward from point A to point B, followed by the consolidation, and finally advance to the point C (the classic example of the downward trend). Broken support level set at the time of consolidation is now acting as resistance to subsequent increases. Resistance at $ 60 also represents 50% of th restoration movement from point A to point C (from $ 100 up to $ 20).
Figure 2 provides a schedule "Xilinx Inc." (XLNX), from October 4, 2000. until November 2001., which shows downward fluctuation from point A to point B. The trend temporarily halted, and formed an area of consolidation with support in the $ 58. After a break below $ 58, a new movement down to a minimum of 35 $. The price then rises from the minimum back to $ 58 - an important level, because it was the level of the previous consolidation. Now his role has changed completely, and it acts as resistance. Moving from $ 35 to $ 58 is approximately 38.2% th restoration movement of $ 92 to $ 35 ($ 92 - $ 35 = $ 57 * 0.382 = $ 21.77 + $ 35 = $ 56.77).
Figure 1 - classic example of the downward trend
Figure 2 - "Xilinx Inc." (XLNX)
This example shows that when the level of resistance (or support level) is formed with the support of the previous violation (or violations of the previous resistance), it often coincides with the Fibonacci ratio (23.7%, 38.2%, 50%, or 61.8%) of the total traffic ending on the level of resistance (or support), which is not easily upset.
Engineering
The main premise of the PFT is that market fluctuations in the same direction, correspond to each other from the point of breakthrough. Consequently, the movement from B to C in Figure 2 corresponds to the movement from A to B ratio of Fibonacci. It is important to note that the ratio between the two oscillations occur on a breakthrough level of support or resistance, rather than the beginning of the second variations in the same direction.
Based on this principle, we can conclude that the point of breakthrough are important Fibonacci levels of recovery for the subsequent correction. Therefore, pricing objectives may be obtained, suggesting that the point of breakthrough is one of the Fibonacci levels of recovery, and that trend should continue as long as it does not disturb the level of support / resistance (set Fibonacci levels of recovery) and start kontrtrendovuyu correction.
Using this technique, you will be able to design a future price objectives:
Projected Fibonacci Targets using four Fibonacci ratio: 23.7%, 38.2%, 50% and 61.8%.
If prices overflows the horizontal level of support / resistance, apply the following formula:
where:
And - the point where the first price fluctuations
B - the point where the first ended with the price fluctuations (horizontal support / resistance)
Fibonacci ratio - one of the following ratios: 23.7%, 38.2%, 50% and 61.8%
You will need to calculate the four goals - for each of the four Fibonacci ratios. Example use of PFT on the graph the Dow Jones Industrial (DJIA) in Figure 3.
Figure 3 - Design Goals for the Fibonacci ascending trend
Notice how price levels coincided with the four calculated levels. Variation up, starting with point A (7400) to point B (8180) was accompanied by a downward correction. It is only after the price broke above the resistance, you can apply the PFT. Then you calculate the four target levels, using a formula designed Goals Fibonacci:
PFT1 = (0.237 * 7400 - 8180) / (0.237 - 1) = 8422
PFT2 = (0.382 * 7400 - 8180) / (0.382 - 1) = 8662 (which temporarily suspended the increase)
PFT3 = (0.500 * 7400 - 8180) / (0.500 - 1) = 8960 (which temporarily suspended the increase)
PFT4 = (0.618 * 7400 - 8180) / (0.618 - 1) = 9442 (which temporarily suspended the increase)
You can apply this technique to the downward trend in exactly the same way. A weekly schedule of FTSE index in Figure 4 show the downward movement starting at point A (6951) and ending at point B (5973), accompanied by the consolidation, which lasted for more than 10 months. After this consolidation, the price broke below the support.
Figure 4 - the use of PFT to the downward trend
Applying the formula of PFT, you will get the following cost objectives:
PFT1 = (0.237 * 6951 - 5973) / (0.237 - 1) = 5669
PFT2 = (0.382 * 6951 - 5973) / (0.382 - 1) = 5368 (which suspended reduction)
PFT3 = (0.500 * 6951 - 5973) / (0.500 - 1) = 4995
PFT4 = (0.618 * 6951 - 5973) / (0.618 - 1) = 4391 (which suspended reduction)
Managing money
Points PFT may also signal the trend spread, making them a convenient tool for the application of strategies to manage money. The schedule shown in Figure 5 illustrates how this can be done.
Figure 5 - PFT as a tool for managing money
Downward movement starts at point A (11750) and ends at point B (9732), accompanied by an upward correction, and ultimately break through support at the level of B. If you are using a formula PFT, you can calculate a value for the first projected goals:
PFT1 = (0.237 * 11750 - 9732) / (0.237 - 1) = 9105
The level of PFT has been made since at least for the DJIA was 9107, that only two items exceeded PFT1. As can be seen in Figure 5, PFT1 noted an important turn on the week's trend, as the DJIA has risen again. It is assumed that you could use this level as the point of exit.
Conclusion
Like all indicators, Fibonacci Projected Targets (PFT) are not a standalone technology, but because of its efficiency and accuracy in projecting price targets, it should be a mandatory tool in the arsenal of the trader. This technique works because the market fluctuation in the same direction are often linked by a Fibonacci ratio breakthrough levels of previous support or resistance. These points can be applied in the conventional money management strategies to minimize risks and maximize profits.
Introduction
Before using the PFT, it is important to understand that a breach of support levels often become resistance levels during a subsequent promotions, especially if the violation level of support coincides with the Fibonacci level of recovery.
Figure 1 shows a hypothetical example of the price movement downward from point A to point B, followed by the consolidation, and finally advance to the point C (the classic example of the downward trend). Broken support level set at the time of consolidation is now acting as resistance to subsequent increases. Resistance at $ 60 also represents 50% of th restoration movement from point A to point C (from $ 100 up to $ 20).
Figure 2 provides a schedule "Xilinx Inc." (XLNX), from October 4, 2000. until November 2001., which shows downward fluctuation from point A to point B. The trend temporarily halted, and formed an area of consolidation with support in the $ 58. After a break below $ 58, a new movement down to a minimum of 35 $. The price then rises from the minimum back to $ 58 - an important level, because it was the level of the previous consolidation. Now his role has changed completely, and it acts as resistance. Moving from $ 35 to $ 58 is approximately 38.2% th restoration movement of $ 92 to $ 35 ($ 92 - $ 35 = $ 57 * 0.382 = $ 21.77 + $ 35 = $ 56.77).
Figure 1 - classic example of the downward trend
Figure 2 - "Xilinx Inc." (XLNX)This example shows that when the level of resistance (or support level) is formed with the support of the previous violation (or violations of the previous resistance), it often coincides with the Fibonacci ratio (23.7%, 38.2%, 50%, or 61.8%) of the total traffic ending on the level of resistance (or support), which is not easily upset.
Engineering
The main premise of the PFT is that market fluctuations in the same direction, correspond to each other from the point of breakthrough. Consequently, the movement from B to C in Figure 2 corresponds to the movement from A to B ratio of Fibonacci. It is important to note that the ratio between the two oscillations occur on a breakthrough level of support or resistance, rather than the beginning of the second variations in the same direction.
Based on this principle, we can conclude that the point of breakthrough are important Fibonacci levels of recovery for the subsequent correction. Therefore, pricing objectives may be obtained, suggesting that the point of breakthrough is one of the Fibonacci levels of recovery, and that trend should continue as long as it does not disturb the level of support / resistance (set Fibonacci levels of recovery) and start kontrtrendovuyu correction.
Using this technique, you will be able to design a future price objectives:
Projected Fibonacci Targets using four Fibonacci ratio: 23.7%, 38.2%, 50% and 61.8%.
If prices overflows the horizontal level of support / resistance, apply the following formula:
PFT = (Fibonacci Ratio * A - B) / (Fibonacci ratio - 1)
where:
And - the point where the first price fluctuations
B - the point where the first ended with the price fluctuations (horizontal support / resistance)
Fibonacci ratio - one of the following ratios: 23.7%, 38.2%, 50% and 61.8%
You will need to calculate the four goals - for each of the four Fibonacci ratios. Example use of PFT on the graph the Dow Jones Industrial (DJIA) in Figure 3.
Figure 3 - Design Goals for the Fibonacci ascending trendNotice how price levels coincided with the four calculated levels. Variation up, starting with point A (7400) to point B (8180) was accompanied by a downward correction. It is only after the price broke above the resistance, you can apply the PFT. Then you calculate the four target levels, using a formula designed Goals Fibonacci:
PFT1 = (0.237 * 7400 - 8180) / (0.237 - 1) = 8422
PFT2 = (0.382 * 7400 - 8180) / (0.382 - 1) = 8662 (which temporarily suspended the increase)
PFT3 = (0.500 * 7400 - 8180) / (0.500 - 1) = 8960 (which temporarily suspended the increase)
PFT4 = (0.618 * 7400 - 8180) / (0.618 - 1) = 9442 (which temporarily suspended the increase)
You can apply this technique to the downward trend in exactly the same way. A weekly schedule of FTSE index in Figure 4 show the downward movement starting at point A (6951) and ending at point B (5973), accompanied by the consolidation, which lasted for more than 10 months. After this consolidation, the price broke below the support.
Figure 4 - the use of PFT to the downward trendApplying the formula of PFT, you will get the following cost objectives:
PFT1 = (0.237 * 6951 - 5973) / (0.237 - 1) = 5669
PFT2 = (0.382 * 6951 - 5973) / (0.382 - 1) = 5368 (which suspended reduction)
PFT3 = (0.500 * 6951 - 5973) / (0.500 - 1) = 4995
PFT4 = (0.618 * 6951 - 5973) / (0.618 - 1) = 4391 (which suspended reduction)
Managing money
Points PFT may also signal the trend spread, making them a convenient tool for the application of strategies to manage money. The schedule shown in Figure 5 illustrates how this can be done.
Figure 5 - PFT as a tool for managing moneyDownward movement starts at point A (11750) and ends at point B (9732), accompanied by an upward correction, and ultimately break through support at the level of B. If you are using a formula PFT, you can calculate a value for the first projected goals:
PFT1 = (0.237 * 11750 - 9732) / (0.237 - 1) = 9105
The level of PFT has been made since at least for the DJIA was 9107, that only two items exceeded PFT1. As can be seen in Figure 5, PFT1 noted an important turn on the week's trend, as the DJIA has risen again. It is assumed that you could use this level as the point of exit.
Conclusion
Like all indicators, Fibonacci Projected Targets (PFT) are not a standalone technology, but because of its efficiency and accuracy in projecting price targets, it should be a mandatory tool in the arsenal of the trader. This technique works because the market fluctuation in the same direction are often linked by a Fibonacci ratio breakthrough levels of previous support or resistance. These points can be applied in the conventional money management strategies to minimize risks and maximize profits.
Forex Magazine
based on www.ensignsoftware.com
based on www.ensignsoftware.com
1 comment:
Wow. What an extensive amount of information regarding Fibonacci. I consider Fibonacci ratios to be one of the greatest methods in trading Forex. Thank you!
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