How is the Fibonacci method used in the stock market?

It is believed that the Fibonacci ratios i.e 61.8%, 38.2%, and 23.6% finds its application in stock charts. Fibonacci analysis can be applied when there is a noticeable up-move or down-move in prices. Whenever the stock moves either upwards or downwards sharply, it usually tends to retrace back before its next move. read more

I am mentioning basic Fibonacci theory and method which can be used in stock market. The Fibonacci sequence is a series of numbers where a number is found by adding up the two numbers before it. Starting with 0 and 1, the sequence goes 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, and so forth. read more

However, more multiples can be used when needed, such as 23.6%, 161.8%, 423% and so on. There are four primary methods for applying the Fibonacci sequence to finance: retracements, arcs, fans and time zones. 1. Fibonacci Retracements. Fibonacci retracements use horizontal lines to indicate areas of support or resistance. read more

However, when used by a vast number of traders, the Fibonacci studies themselves may become a very major factor in influencing the market. Most of the time, the Fibonacci studies work due to the cascade effect, which arises because of the huge number of traders artificially creating support and resistance levels. read more