Fibonacci Numbers

A number sequence named after Leonardo Fibonacci, an Italian mathematician who was born around 1170. They are produced by adding two numbers to arrive at a third e.g. 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233. The ratio of a number to the next highest in the sequence is approximately 1 to 0.618, while the ratio between a number and the sum of the number and the next higher number, for example 89 to 233, is approximately 1 to 0.382. They are sometimes described as golden ratios and said to be found in a wide range of natural phenomena such as the ratio of male to female bees in a hive and the diameters of the seed spirals in the head of a sunflower. The ratios are usually expressed as percentages, 61.8 percent and 38.2 percent. They are referred to as Fibonacci levels and are incorporated in so-called Fibonacci indicators which are used in technical analysis to try to forecast market movements. They are most widely used to calculate so-called Fibonacci retracements, which indicate areas of support and resistance on price charts. They can be calculated by locating the most recent high and low then drawing five horizontal lines; the first at 100 percent, equivalent to the high on the chart, the second at 61.8 percent, the third at 50 percent, the fourth at 38.2 percent and the fourth at 0 percent, equivalent to the low on the chart. New support and resistance levels are often near these lines.