Fibonacci – a key element of our plan
A crucial element of our plan is to be in control, to limit negative stress and to not be caught in the herd’s stampede towards the exits! With Fibonacci ratios we can calculate in advance where the market has the highest potential to go and indeed to turn.
Fibonacci projections and retracements are, by simple definition: using known ranges or swings in the market that have already happened (high and low pivots) and then multiplying that range by known Fibonacci ratios then adding or subtracting that (total range) to or from those pivots. Then using those projections and past ranges in an attempt to predict where the market could go to and stop in the near future by plotting areas where there is a higher number of projections and retracements falling in one area.
Once we have these Fibonacci projections we look for a grouping or confluence of the projections. Typically there will be 3-6 areas where the majority of your projections and retracements will fall into a relatively tight area. The confluence areas tend to have a high occurrence of support and resistance. These areas become much more powerful and useful as support and resistance areas as additional ratios are added from different areas on the same chart and ALSO when this area of confluence is also visible from several different timeframes. For example confluence from a 10-minute, 60-minute and a daily chart in the same area will be much more powerful then just one of the timeframes by itself.
This predictive analysis is done with 4 types of Fibonacci projections. Even using just one of these projection techniques will give you a distinct advantage over the market but when you combine these four power techniques into one complete analysis along with multiple time frame analysis you get a very powerful, synergistic combination available to you as a trader for pre-determining support and resistance. We add this work to our Gann & Elliott work giving us a distinct advantage over the general market.