The Golden Ratio and Fibonacci Sequence are not new concepts. They actively work in different fields outside mathematics – in nature, architecture, and even in the financial markets. They are basic concepts taught in mathematics, so it shouldn’t be difficult to conduct your own research on mechanics of the Fibonacci Sequence.
The Fibonacci Sequence was conceived by Italian Mathematician Leonardo Pisano Fibonacci around the 13th century, although related patterns have already appeared in Sanskrit poetry’s syllabic measures. It is one of the mechanisms used in his Liber Abaci (Book of Computation). The Fibonacci Sequence can be seen in the circular patterns of the chambered nautilus shell, petal patterns and numbers of flowers, patterns of leaves, and even in the composition of music. There’s even a Fibonacci Fountain by Helaman Ferguson in the Maryland Science and Technology Center, which is a mathematical piece of art that sprays water as high as 36 feet. The amazing power of the Fibonacci Sequence and the Golden Ratio permeates many fields in science and art. It should be little surprise that it works in the stock market.
Professional stock traders have expressed their doubts in the importance of Fibonacci in the stock market, but that was 20 years ago. The Fibonacci Sequence has gained ground in the stock market already, and is now being integrated by different traders in their strategies.
Many factors differentiate circumstances of each trader, so the real challenge is to apply the Fibonacci method correctly. And by correctly, that means depending on your situation. Many people who claim to be experts write so many articles and books on the subject but they’re not even traders! It ends up being a case of the blind leading the blind.
I’ve racked up experiences as a trader, on top of my profession as an engineer. I’ve explored so many techniques in trading, only to end up disappointed. When I learned about the Fibonacci technique, I was a bit guarded at first. I didn’t want to waste my time on useless technique anymore. But lure of Fibonacci couldn’t be resisted. It was unlike the techniques I’ve learned, and perhaps it would offer me a revolutionary solution in improving my trading style. I invested time and effort in researching about the technique and thankfully, it paid off!
You will notice that my book’s subtitle is “The Practical Application of Fibonacci Analysis to Investment Markets”. I would like to underscore the importance of the operative word “practical”. In the book, we will not dwell on abstract concepts. We will draw from experience of what works, how much risk is realistic, and how to make money with the Fibonacci technique using what resources are available.
– Joe DiNapoli
Fibonacci Trading Tools
Let me give you an overview of the five kinds of trading tools that Fibonacci analysts use: arcs, fans, retracements, extensions, and time zones. You will learn all this jargon eventually, but I assure you that experienced traders are very familiar with these terms. These arcs, fans, retracements, extensions and time zones can get really dizzying when plotted on charts because the amount is simply exhaustive. Plotting them will present you with options, but then you’ll end up with too many of them. This is particularly true when you trade in a lower timeframe intraday. The challenge is how to come up with a trading decision when there are too many options presented.
Traders are intimidated by the Fibonacci technique because it can be confusing when it comes to actual application.
Wrong application techniques can lead to inconsistent results. That’s what DiNaPoli’s Trading Edge is.
Joe DiNapoli has been in the market long enough to have tried and tested many techniques that worked and did not work. He developed DiNaPoli Levels to bring the Fibonacci technique to practical and effective use. DiNaPoli calls his technique DLEVELS. With this technique, DiNaPoli incorporates many factors in one indicators, or the DiNaPoli Levels.
Simplicity Spells Success!