Ask Colin

FIBONACCI RATIO

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  1. Where can I find a book on the Fibonacci ratio?
  2. As a relative newcomer to the field of TA I am amazed at the credence given by many experts in the field to some concepts which seem to have no plausible justification. One example is the use of ratios derived from the Fibonacci series, as applied to index and/or stock prices to forecast advances and retracements. In the "rabbit population" example (which I believe came from Fibonacci himself) it is easy to see how the series arises from the initial assumptions. Other concepts in TA, such as "support" and "resistance", lend themselves to plausible explanation/justification. However, in the several "Fibonacci" articles I have come across in the ATAA Journal and elsewhere I have not found any attempt at a justification. It seems to be simply taken for granted that "it works" though most of the examples are far from convincing to the sceptical reader. Do we have to attempt a justification by assuming that the Fibonacci theory is so widely accepted that it has approached a "self fulfilling prophecy" - ie so that a significant proportion of the investing community is avidly plotting these ratios from all significant chart features, and making buy/sell decisions accordingly? Or is there a simpler justification?
  3. Could you explain Fibonacci numbers please?