Thread: Fibonacci

Hello,

my name is Francisco and I am Spanish. My English isn't very good so if I can't explain myself clear enough, sorry.

I'm starting in the world of finance and looking for examples of chart anylisis, I have seen a lot of series of Fibonacci but I can't understand why they are used so my question is: what is the meaning of series Fibonacci in chart analysis? What are they for?

Technical analysis is pretty much using MS paint to try to figure out the fastest way to bankruptcy. I'd be bold enough to say that pretty much every trader uses it to one degree or another, myself included. It's the alternative to fundamentals, which is like sales numbers, multiple toddlers choking to death on a companies product, CEO has a heart attack and dies and then people worry who will run the company...stuff like that.

This is technical analysis. It's not actual MS paint, but a trading platform called ThinkorSwim.

The blue and purple lines are average price, just each for different time frames.

Under that is volume. It shows you whether people give a crap about what your looking at or not. More money being thrown at the stock means more movement.

Under that is called RSI, its more useful for trading in a channel, but I'm lazy and don't want to get rid of it. If its at the top the stock might be overbought, the bottom- oversold. And thats pretty much just because the price moved too fast. It's called a momentum indicator just like the last one which is called...

MACD (Moving Average Convergance Divergance). Also, very common. A combination of average prices. When those two lines cross or start pointing in funny directions, it helps indicate whether a move is starting or stopping.

All those things are technical tools, using them to decide when to trade is technical analysis.

Fibonacci is the belief that after a stock has a run it will reverse in a predictable way. Just that once a stock is done running that it will pullback in predictable, %30, %50, and %70, increments, or something like that. Those may not be the exact amounts, but that's idea. Those areas would be when you should buy according to that theory.

There's a bunch of methods like that; Bollinger Bands, Elliot Wave, Gap fill. Some work, some don't.