Saturday, June 04, 2011

The Fibonacci sequence and its application in Elliott wave

The Fibonacci sequence and its application in Elliott wave

Known for millennia by scientists, biologists and mathematicians, the sequence of numbers 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, and so on to infinity is known today as the Fibonacci sequence . The sum of any two adjacent numbers in this sequence forms the next number in sequence, viz., 1 plus 1 equals 2, 1 plus 2 equals 3, 2 plus 3 equals 5, 3 plus 5 equals 8, and so on to infinity. The ratio of any two consecutive numbers in sequence approximately 1.618, or vice versa, .618, after the first few numbers. Refer to Figure 24 for an overall weight ratio interlocking all Fibonacci numbers from 1 to 144th

1.618 (0.618, or) is known as the Golden Ratio or Golden Mean. Nature uses the Golden Ratio in his most intimate building material and most advanced models, shapes, as small as atomic structure and DNA molecules to those as large as planetary orbits and galaxies. It is involved in such diverse phenomena as quasi crystal arrangements, planetary distances and periods, reflections of light beams on glass, in the brain and nervous system, musical arrangement, and the structures of plants and animals. Science is quickly discovered that indeed there is a basic principle of the proportional nature. The stock market has the same mathematical base as well as these natural phenomena.

At each level of market activity, bull market shares in five waves and a bear market share in three waves, 5-3 gives us a mathematical relationship that is based on Elliott wave principle. We can generate complete Fibonacci sequence using the concept of progression of Eliot market. If we start with the simplest expression of the concept of a bear swing, we get a straight line decline. A bull swing, in its simplest form, is one straight line advance. A complete cycle is two lines. The next level of complexity, the corresponding numbers are 3, 5 and 8. As shown in Figure 25, this sequence can be taken to infinity.

In its broadest sense, then, Elliott Wave Principle suggests that the same law that shapes living creatures and galaxies is inherent in the spirit and attitudes of people massively. The Elliott Wave Principle shows clearly the market because the stock market is among the best reflector of mass psychology in the world. It's almost perfect for capturing human social psychological states and trends, reflecting the fluctuating value of its productive enterprise, and makes manifest very realistic models of progress and regress. Are our readers accept or reject this proposal does not make much difference, as the empirical evidence is available for research and observation. Goal in life? Yes. Order the stock market? Obviously.

Ratio Analysis

Correlation analysis showed a number of precise price relationships that occur frequently among the waves. There are two categories of relationships: retracements and multiples.

Retracements

Quite often, Fibonacci correction recovers percent from the previous wave. As shown in Figure 26, sharp corrections tend more often to retrace 61,8% or 50% from the previous wave, especially when they occur as wave 2 of the impulse wave, wave B of a larger zig-zag or wave X in a more zig-zag. Sideways corrections tend more often to retrace 38,2% from the previous impulse wave, especially when they appear as 4 wave, as shown in Figure 27th

Retracements are where most analysts place their focus. Far more reliable, however, relations between the deputy waves, or pitches are going in the same direction, as explained in the next section.

Motive wave multiples

When wave 3 is extended, waves 1 and 5 tend towards equality and 0.618 respectively, as illustrated in Figure 28th In fact, all three impulsive waves tend to be associated with Fibonacci mathematics, whether by gender, 1.618 or 2.618 (whose inverses are .618 and .382). These impulse wave relationships usually occur in percentage. For example, I received the 1932-1937 wave of 371.6%, while wave III 1942-1966 was 971.7%, or 2.618 times.

Wave length 5 is sometimes associated with the Fibonacci ratio of the length of wave 1 to 3 wave, as illustrated in Figure 29th In the rare cases when wave 1 is extended, it is wave 2, which are often shared the impulse wave in the Golden Section, as shown in Figure 30th


In a related observation, unless wave 1 is extended, wave 4 often divides the price range of an impulse wave in the area of ​​Golden. In such cases, the last section 0.382 of the total distance when wave 5 have not been extended, as shown in Figure 31, and .618 when it is, as shown in Figure 32nd This guide explains why retracement after a fifth wave often has a double resistance to the same level: at the end of the previous fourth wave and 0,382 retracement point.


Corrective Wave Multiples

The zig-zag, the length of wave C is usually equal to that of wave A, as shown in Figure 33, although it is not unusual 1.618 or 0.618 times the length of wave A. This same relationship holds true for the second zig-zag (labeled C) in relation to the first (labeled I) in double zig-zag pattern, as shown in Figure 34th


In a regular flat correction, wave, A, B and C, of ​​course, approximately equal. In an expanded flat correction, wave C is usually 1.618 times the length of wave A. Wave C often stops after wave of 0.618 times the length of the A wave. Each of these trends are illustrated in Figure 35th In rare cases, wave C is 2.618 times the length of wave A wave in B flat extended sometimes 1.236 or 1.382 times the length of wave A

In a triangle, we found that at least two of the alternate waves usually associated with one another by 0.618. That is, in a contracting, ascending or descending triangle, wave a = .618 c, wave c = 0,618 is, or wave d = 0,618 b. By expanding triangle, the number is 1.618.

The double and triple corrections, the net travel of one simple pattern is sometimes connected with each other with equality or, particularly if one of the trees is a triangle, with 0.618. Finally, wave 4 quite often merged with the gross or net price range that there is equality or Fibonacci relationship to the corresponding wave second As with impulse waves, these relationships usually occur in percentage.

These guidelines are increased dramatically in utility when used together, because several are also applicable in almost any situation in different degrees of trend.

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