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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: cloudless who wrote (6286)	1/4/2000 9:23:00 PM
From: Matthew L. Jones	Read Replies (1) \| Respond to of 18137

I'm a musician, so I'll try to make a musical analogy. There is a reason why 99% of all "hit songs" happen to be in 4/4 time. That reason, I believe, is that 4/4 time happens throughout all of creation, naturally. The human heart beat, sound waves, the oscillation of the oceans, the wind-- virtually every where. So the human psyche is programmed (if you will) to identify with that type of rhythm. Fibonnaci numbers are much the same way. As I understand it, they are named after a guy named Leonardo Pisano although he was known by the name Fibonacci. Fibonacci wrote a book that was very important around 1200 AD called Liber Abaci. In it he dealt with all kinds of mathematical applications, but the thing that made him mainstream and remembered today was a short passage in the book that was devoted to solving a problem. He worked out the mathematical solution to how many rabbits would be born in the course of a year from one original pair of rabbits, assuming every month each pair reproduced another pair and that the new pair begin to reproduce when they were two months old. He calculated that the original pair would have 233 pairs of offspring in one year. After the process got started, the numbers of pairs at the end of each month would be as follows: 1,2,3,5,8,13,21,34,55,89,144,233. The odd thing he discovered was that each number was the sum of the preceding two numbers. Divide any Fibonacci by the higher number (after 2) and the answer is always 1.6; after 144, 1.618. The Greeks had discovered this same proportion and called it "the golden mean". The proportions of the Parthenon, the shape of playing cards, credit cards, the General Assembly building at the UN, the horizontal beam of the Christian cross is 61.8% of the vertical member, flower patterns, the leaves of an artichoke, the leave stubs of a palm tree, the length of the human body (above the navel) to the length (below the naval), the length of each successive bone in our hands, the spiral which occurs in nature (ram's horn, sea shells, etc.) is based on this same ratio. This is a readers digest version of a part of the book "Against the Gods-- The Remarkable Story of Risk" by Bernstein. Here is the bottom line. Just as the 4/4 meter occurs throughout nature and is therefore "natural" feeling to us, the Fibonacci numbers occur throughout nature and are presumably built into the human psyche to some degree and represent the typical retracements of trends in market moves, since after all, market moves are nothing more than mass pychology in action. For example, of the 10 years that I personally studied the intermediate trends in the SPX and the NDX, the average retracement in the NDX was 62% of the previous move, and in the SPX it was 38% of the previous move. If you use your Fib retracement tool (Q-Charts), you will see that there is a very clear correlation to the Fib numbers becoming natural support and resistance lines on a chart. Well, hopefully this will pique your interest... I'd start with the book I plagerized. Matt