Fibonacci Webinar PDF

Fibonacci Primer
MODULE 1: THE SEQUENCE
www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Modules
Elliott Wave Ultimate Course: Section III
Module 1: The Sequence

Fibonacci Primer
Module 2: Expansion and Contraction

Market Cycle
Fibonacci Expansion and Contraction in Markets

Intro to Mathematical Applications
Fibonacci Sequence of Numbers

Leonardo Fibonacci was an Italian mathematician born in the 12th century.
He is known to have discovered the Fibonacci sequence of numbers.
A sequence of numbers after zero and one, where each successive number
is the sum of the two previous numbers.
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144…

1 + 1= 2 2+3=5 5 + 8 = 13 13 + 21 = 34 34 + 55 = 89
1 + 2= 3 3+5=8 8 + 13 = 21 21 + 34 = 55

The Golden Section
Fibonacci Ratios
The Golden Section is obtained by finding the ratio between successive values in the
Fibonacci series of numbers.
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377…
= ~ 0.618
 Denoted by the Greek Letter phi
 Inverse or reciprocal of phi = Phi:
1/.618 = ~ 1.618
+ Also calculated by taking the ratio of any Fibonacci number to its next
lower number
+ Called The Golden Ratio or Phi = Φ

The Golden Section
Fibonacci Ratios
The Golden Section is obtained by finding the ratio between successive values in the
Fibonacci series of numbers.
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377…
Number Divided By Ratio

8 13 0.615
13 21 0.619
21 34 0.618
34 55 0.618
55 89 0.618
89 144 0.618

The Golden Section
Fibonacci Ratios
The Golden Ratio is obtained by finding the ratio of any Fibonacci number to its next lower
number.
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377…

13 8 1.625
21 13 1.615
34 21 1.619
55 34 1.618
89 55 1.618
144 89 1.618

The Golden Section
Fibonacci Ratios
Or by finding the ratio between every second value in the Fibonacci series of
numbers.
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377…

34 89 0.382
89 233 0.382
55 144 0.382
34 13 2.615
89 34 2.618
144 55 2.618

The Golden Section
Fibonacci Ratios
Or by finding the ratio between every third value in the Fibonacci series of numbers.
1 2 3
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377…
3 2 1

34 144 0.236
55 233 0.236
89 377 0.236
89 21 4.238
144 34 4.235
233 55 4.236

Fibonacci with Elliott Wave Theory
Elliott and the Fibonacci Sequence

 The Wave Principle (1938)
+ Also known as the Elliott Wave Principle
+ Tied collective human behavior patterns to the
Fibonacci sequence or golden ratio
Ralph Nelson Elliott

1871 – 1948

Fibonacci with Elliott Wave Theory
The three important aspects of wave theory are:
 Wave Form Elliott observed in his work that patterns in the

market are repetitive in form, but not necessarily in
 Ratio time or amplitude.
 Time Pattern refers to this wave sequence completing a
5
cycle in any time frame and is considered the most
B important element of the three in wave analysis.
3
A However, we will look very closely at ratio analysis,
1 C and introduce time analysis as well.
4

Fibonacci and Wave Form
Fibonacci Numbers in Elliott’s Wave Form
Wave form
1, 2, 3, 4, 5, A, B, C = 8 waves 144
13 55
1 1 5 8
i ii iii iv v a b c etc.21
3 34
= 34 waves
89 + 55 = 144 waves 89
Frost, A.J. and Robert Prechter. Elliott Wave Principle (West Sussex, John Wiley & Sons Ltd, 1999).

Download MotiveWave charts for 14-day trial at: bit.ly/EWcharts www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved
Nomenclature - According to Elliott

Look at a shorter time frame and suddenly 2 waves turns into 8 waves. On a smaller time
frame, 8 waves breaks down into 34 waves.
Weekly
Daily
(1) and (2) = 2 waves
1, 2, 3, 4, 5, A, B, C = 8 waves
i ii iii iv v a b c = 34 waves
Hourly
21 waves 13 waves


Naming conventions:
 Primary wave degrees on monthly charts

1 2 3 4 5 A B C
 Intermediate wave degrees on weekly charts
(1) (2) (3) (4) (5) (A) (B) (C)
 Minor wave degrees on daily charts
1 2 3 4 5 A B C
 Minute wave degrees on hourly charts
i ii iii iv v a b c

Wave Degree 5-wave Impulsive 3-wave Corrective Time Frame

Grand Super Cycle I II III IV V a b c
Super Cycle (I) (II) (III) (IV) (V) (a) (b) (c) Annual
Cycle I II III IV V a b c Quarterly
Primary 1 2 3 4 5 A B C Monthly
Intermediate (1) (2) (3) (4) (5) (A) (B) (C) Weekly
Minor 1 2 3 4 5 A B C Daily
Minute i ii iii iv v a b c Hourly
Minuette (i) (ii) (iii) (iv) (v) (a) (b) (c) 15-minute
Subminuette i ii iii iv v a b c 5-minute
Frost, A.J. and Robert Prechter. Elliott Wave Principle (West Sussex, John Wiley & Sons Ltd, 1999).

Nomenclature - ROYGBIV
Motive wave Correction

Wave Degree 5-wave Trend 3-wave color / font Timeframe
Cycle 12345 abc black 22 Quarterly

Primary 12345 ABC red 20 Monthly
Intermediate 12345 ABC yellow/orange 20 Weekly
Minor 12345 ABC green 20 Daily
Minute 1 2 3 4 5 abc blue 18 4 Hour
Minuette 1 2 3 4 5 abc purple 18 and
Subminuette 1 2 3 4 5 abc white 18 1 Hour

Micro 12345 ABC red 16 15 Minute
Submicro 12345 ABC yellow 16 and
Miniscule 12345 ABC green 16 5 Minute

Nomenclature - ROYGBIV
Standardized Motive waves:

sequence of UC Roman numerals
Corrections:
labels Lower case letters
involving:
Motive waves:
Arabic numerals
Numbers and Corrections:
Letters Upper case letters
Motive waves:
Arabic and LC Roman numerals
Roman Corrections:
numerals Lower case letters
Easily Motive waves:

Arabic numerals
memorized Corrections:
repetition Upper case letters
Frost, A.J. and Robert Prechter. Elliott Wave Principle (Georgia, New Classics Library, 2005).
Scheme to differentiate the degrees of waves in the wave progression UC = UPPER CASE LC = lower case

Wave Label Exercise - ROYGBIV
Top Down Approach
MONTHLY – PRIMARY
– red 20 pt 1

Weekly
Top Down Approach

1
WEEKLY – INTERMEDIATE
– orange 20 pt

Top Down Approach

1
5
WEEKLY – INTERMEDIATE B
– orange 20 pt
3 A
C
4 2

Top Down Approach
DAILY– MINOR
1
- green 20 pt 5 B
A
3
C
4 2

Top Down Approach
DAILY – MINOR 1
5 B
- green 20 pt 52
C2
3 1 4 A
3 B 1
4 5 4
3 A
5 1 3
B
3 5
A C 2 C
2
4 4
1
5 1
3 B
1 A 2
4 C
2
2
Ratio Analysis
Fibonacci Numbers in Ratio Analysis
Wave form  The interrelationship of the numbers in the

Fibonacci sequence produce three important ratios:
Ratio analysis
 0.618
 0.382
 0.500 (halfway between 0.618 and 0.382)
 Markets react to these Fibonacci levels time and

time again which is why they cannot be ignored

Ratio Analysis
Wave form
A B
Ratio analysis
A/B = .382/.618
.382 .618
B/C = .618/1.00
1.00
= .618
C

Ratio Analysis

5
Wave form
3
0.382
Ratio analysis
4
1
0.618
2

Ratio Analysis
0.618
0.382
Ratio Analysis
0.382
0.618
Market Contraction
Fibonacci Numbers in Ratio Analysis - Corrections
Wave form 1
5
Ratio analysis
3 B
0.618
A
4
1
C
2
0.382
2

Market Contraction
Fibonacci Numbers in Ratio Analysis - Corrections
Wave form 3
5
Ratio analysis
B
0.382
3
4 C
1 4
0.618
2

Market Contraction
Fibonacci Retracements
Wave form Use the three Fibonacci ratios to

predict the end of a retracement
1
Ratio analysis
38.2%
2
100%
 e.g. Wave 2 retracing wave 1

Market Contraction
Market Contraction

1
Ratio analysis
50%
100% 2

Market Contraction
Market Contraction

1
Ratio analysis
61.8%
100%
2

Market Contraction
3rd profit target

2nd profit target
1st profit target
Market Contraction
Wave form
Ratio analysis Common Ratios for Retracements

 0.236 To the left we have the most common
Fibonacci retracements but what about the
 0.382 square root of .618?
 0.5
With this retracement, the Elliott Wave
 0.618 structure offers an additional target.
0.786= √0.618
Elliott Retracement Waves
Fibonacci Retracements – Wave 2
Wave form Wave 4 can also be a

5 triangle or a complex
Ratio analysis combo
B
3 Guideline of Alternation
applies to this example
1 A
C Wave 2 targets:
4
B  0.50 times wave 1
Irregular flat
(sideways)  0.618 times wave 1
A
C  1 times wave 1
2
 Does not exceed 1
Zigzag times wave 1
(sharp, simple)

Wave 4
retraces
<38.2% of
Wave 3
Wave 2 retraces
61.8% of Wave 1
Fibonacci Retracements – Wave 4
Wave form Guideline of Alternation

5
dictates that wave 4 is a
Ratio analysis B sideways correction of
3 wave 3 because wave 2 is a
zigzag correction.
1 A
C Wave 4 targets:
B 4
 0.236 times wave 3
Irregular flat
(sideways)  0.382 times wave 3
A
C  0.50 times wave 3
2
Zigzag
(sharp, simple)
Wave 2 retraces
>78.6% of Wave 1
with a zig zag
Wave 4 retraces
<23.6% of Wave 3
with an irregular flat
In zigzag wave 2, wave B retracement
Wave form depends on pattern of wave B:
5
Ratio analysis  Zigzag B

B (50 – 79% of A)
3
 Running triangle B
(10 – 40% of A)
1 A
C  Triangle B
4 (38.2 – 50% of A)
B
A Wave C targets:
C  0.618 times wave A
2
 1 times wave A
Zigzag
(sharp, simple)  1.618 times wave A

Wave 2 retraces 78.6% of Wave 1 with a zig zag:

Wave B is 61.8% times Wave A
Wave C is 2.0 times Wave A
Wave form If wave 4 is a regular flat,

5 usually waves A, B and C are
Ratio analysis equal.
B
3 If wave 4 is an irregular or
expanded flat, then:
 Wave B is 1.236 times
1 A wave A or 1.382 times
C
4 wave A
B
 Wave C is 1.618 times
A Irregular flat wave A or 2.618 times
C (sideways) wave A
2

Wave 4 is an
irregular flat
Wave 4 is an
irregular flat
Wave form 5
B If wave 4 is a running flat,

Ratio analysis 3 then:
 Wave B is usually
A more than 1 times
1
C wave A
B
4
B  Wave C does not
extend beyond the
A end of Wave A
C
2
C
A
Running flat
Wave form If wave 4 is a symmetrical,

5 ascending or descending
Ratio analysis triangle, most commonly,
each sub-wave is 0.618 times
3 the length of the previous
B alternate sub-wave:
D
 Wave E is 0.618 times
1 wave C and 0.382 times
E
C 4
wave A
B
A
 Wave C is 0.618 times
A Triangle wave A
C (symmetrical)  Wave D is 0.618 times
2
wave B

Wave form 5 Next most common

relationship is each sub-wave
Ratio analysis
3 is 0.618 times the previous
B
adjacent sub-wave.
D For example, wave E is:
1
 0.618 times wave D
E
C 4
B  0.382 times wave C
A
Triangle  0.236 times wave B
A
C (symmetrical)  0.146 times wave A
2

Wave form 5 If wave 4 is a reverse

symmetrical (expanding)
Ratio analysis D triangle, then:
B
3  Wave E is 1.618 times
wave C
1 A  Wave D is 1.618 times
C
B wave B
E
4  Wave C is 1.618 times
A Triangle wave A
C (reverse
2
symmetrical)

Wave form 5
The next most common

Ratio analysis D relationship is 1.618 times the
B
3 previous adjacent sub-wave.
For example, wave E is:
1 A
C  1.618 times wave D
B
E  2.618 times wave C
4
A  4.236 times wave B
Triangle
C
(reverse  6.854 times wave A
2
symmetrical)

Market Expansion
Fibonacci Projections
Wave form
Use the inverse of the Fibonacci
Ratio analysis ratios to predict the end of extensions
100%
1
100% 4
2
 e.g. Wave 3 extension

Market Expansion
Market Expansion
Wave form
5
3
161.8%
4
1
100%
2

Market Expansion
Market Expansion
Wave form
5
3
261.8%
3
100% 1

2

Market Expansion
Market Expansion
Wave form
ratios to predict the end of extensions
5
Ratio analysis 3
423.6%
3
1
100%
2  e.g. Wave 3 extension

Market Expansion
Market Expansion
Wave form Common Ratios for Wave Extensions

 1.618 = 1 / 0.618 To the left we have the most
Ratio analysis common Fibonacci projections
 2.618 = 1 / 0.382 but what about the square
root of 1.618?
 4.236 = 1 / 0.236
With this projection, the Elliott
Wave structure offers an
additional target.
1.272= √1.618

Elliott Trend Waves
Wave form 5
Wave 3 is a multiple of wave 1.
Ratio analysis B Wave 3 targets are either:
3
 1 times wave 1
A  1.618 times wave 1

1
B 4
 4.236 times wave 1
A
C extensions
2

Elliott Trend Waves
Wave form 5 Wave 5 is a multiple of

wave 1 or the difference
Ratio analysis B between start of wave 1
3
and end of wave 3.
Wave 5 targets when wave
1 A 3 is extended:
C
4
 1 times wave 1
B (equality)
A  0.618 times wave 1

2
 0.618 times wave 1 to
wave 3

Elliott Trend Waves
Wave form
Wave 5 is a multiple of
Ratio analysis 5 wave 1 or the difference
between start of wave 1
B and end of wave 3.
3
5 is extended:
A
1  1 times wave 1 to
C
4 wave 3
B
 1.618 times wave 1 to
A wave 3
C
2

Elliott Trend Waves
Wave form
Ratio analysis 5 Wave 1 is a multiple of the

difference between tops of
B wave 3 and 5.
3
1 is extended:
1 A  1.618 times wave 3 to
C wave 5
B 4
A
C
2

Summary of Retracements and Projections
Fibonacci Ratios
Wave form  The rule of divine proportion suggests that the market
reacts in accordance to the ratios calculated from the
numbers in the Fibonacci sequence.
Ratio analysis
Retracements Projections
(waves 2 and 4) (waves 1, 3, and 5)
38.2% 161.8%
50.0% 261.8%
61.8% 423.6%

Fibonacci Convergence

1. Horizontal Lines Capturing Key Elliott Wave Cycle Highs and Lows
2. FIBO Retracement Tool on 2-3 Prior Swings
By measuring the FIB retracement of 3 different Elliott Wave

sequences, we are able to find confluence or convergence
zones to the right for subsequent price action
Waves (A)(B)(C)
Waves 1-5 of (C)
Wave 3
Both Combined for Convergence
By measuring the FIB retracement of 3 different Elliott Wave

sequences, we are able to find confluence or convergence
zones to the right for subsequent price action
Waves (A)(B)(C)
Waves 1-5 of (C)
Wave 3

Fibonacci Webinar PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Fibonacci Webinar PDF

Uploaded by

Copyright:

Available Formats

Fibonacci Primer

MODULE 1: THE SEQUENCE

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Elliott Wave Ultimate Course: Section III

Module 1: The Sequence

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Fibonacci Expansion and Contraction in Markets

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Fibonacci Sequence of Numbers

He is known to have discovered the Fibonacci sequence of numbers.

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144…

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377…

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377…

Number Divided By Ratio

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377…

Number Divided By Ratio

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377…

Number Divided By Ratio

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Number Divided By Ratio

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Elliott and the Fibonacci Sequence

Ralph Nelson Elliott

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Elliott and the Fibonacci Sequence

The three important aspects of wave theory are:

 Wave Form Elliott observed in his work that patterns in the

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Fibonacci Numbers in Elliott’s Wave Form

Elliott and the Fibonacci Sequence

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Elliott and the Fibonacci Sequence

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Elliott and the Fibonacci Sequence

 Primary wave degrees on monthly charts

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Elliott and the Fibonacci Sequence

Wave Degree 5-wave Impulsive 3-wave Corrective Time Frame

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Motive wave Correction

Cycle 12345 abc black 22 Quarterly

Minuette 1 2 3 4 5 abc purple 18 and

Subminuette 1 2 3 4 5 abc white 18 1 Hour

Submicro 12345 ABC yellow 16 and

Miniscule 12345 ABC green 16 5 Minute

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Standardized Motive waves:

Easily Motive waves:

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Top Down Approach

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Top Down Approach

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Top Down Approach

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Top Down Approach

www.fxtradersedge.com ©2013 FX Trader’s EDGE TM All Rights Reserved

Top Down Approach

Fibonacci Numbers in Ratio Analysis