Fibonacci is found throughout
trading literature. Fibonacci is mainly found in
discussions concerning support and resistance levels. Leonardo Fibonacci was an
Italian mathematician who was around during the 12th century and is attributed
to discovering the "Fibonacci numbers". These numbers refer to a sequence of
numbers where each successive number is the sum of the two previous numbers
i.e.1, 2, 3, 5, 8, 13, 21 etc.
Key Fibonacci ratios are 38.2%,
61.8% and 1.618%.
Support and resistance levels
are created by drawing a line between two extreme points and then dividing the
vertical distance by Fibonacci ratios. Prices are expected to find support or
resistance at these price levels.
For
more information see the following links:
Wikipedia
http://en.wikipedia.org/wiki/Fibonacci_number
Investopedia
http://www.investopedia.com/terms/f/fibonaccilines.asp
http://www.investopedia.com/terms/f/fibonacciretracement.asp