What Is a Fibonacci Fan?

A Fibonacci fan is a charting technique used in technical analysis. It employs the Fibonacci ratio to illustrate and predict various support and resistance levels for securities' prices.

The Fibonacci ratio can be used to describe the proportions of things, from nature's smallest building blocks, such as atoms, to the most advanced patterns in the universe, such as celestial bodies.

Nature and certain human endeavors, including art and architecture, rely on this innate proportion to maintain balance. The financial markets also seem to conform to this "golden ratio."

Understanding Fibonacci Fans

Fibonacci fans are sets of sequential trendlines drawn from a trough or peak through a set of points dictated by 澳洲幸运5开奖号码历史查询:Fibonacci retracements.

How to Draw Them

To create a Fibonacci fan, a trader first draws a 澳洲幸运5开奖号码历史查询:trendline which will serve as the base of the fan. In an upwa🌠rd trend, this trendline usually connects the low price and high price of a security over a given period of time.

Then, to locate retracement levels, the trader divides the difference in price between the low and high ends by ratios determined by the Fibonacci series. These ratios typically are 23.6%, 38.2%, 50%, and 61.8%.

🎃 Then, three additional trendlines are formed b༺y connecting the starting point for the base trendline with each retracement level created by the ratios. The result is the pattern called the Fibonacci fan.

How to Use Them

Traders can use the lines of the Fibonacci fan to project key future points of 澳洲幸运5开奖号码历史查询:resistance or support. These are points at which they might expect price tren💯ds to🎃 reverse.

Once a trader identifies patterns on a chart, they can use those patterns to predict future price movements and levels of support and resistance. The fan pattern may also al𒊎ert traders to possible price trend reversals.

Traders then use the pred🌊ictions to time their trades.

Fibonacci Series and Ratio

The 澳洲幸运5开奖号码历史查询:Fibonacci sequence that determines the 🧜Fibonacci ratio of 1.618 begins with the digits zero and one. Then it proceeds infinওitely with the next number in the sequence equal to the sum of the two numbers preceding it (e.g., 0, 1, 1, 2, 3, 5, 8, 13, 21, 35, etc.).

The proportion of any adjacent terms equals approximately 1.618, represented in mathematics by the Greek letter phi (Φ). Coincidentally, this figure underlies a huge number of naturally occurring patterns.

Technical Analysis and Fibonacci Ratios

For unknown reasons, stock prices appear to behave in patterns consistent with the Fibonacci ratio as well. Thus, it's not surprising that traders use technical analyses that are based upon Fibonacci ratios. And these can involve both the price and time axes of charts. Analysts can also use retracements to produce arcs or fans using arithmetic or logarithmic scales.

It's not clear whether these tools work because stock markets exhibit some form of natural pattern or because many investors use Fibonacci ratios to predict price movements, making them a self-fulfilling prophecy.

In any event, key support and resistance levelsꦅ tend to occur frequently at the 61.8% retracement level on both up♍trends and downtrends.

How to Determine Key Ratios

To derive the three key ratios typically used in technicalꦺ analysis based upon the Fibonacci series, simply find the proportion of one number in the series to its neighbors.

Adjacent numbers produceও the inverse of phi, or 0.618, corresponding to a retracement level at 61.8%. Numbers two places apart in the sequence yield a ratio of 38.2%, and numbers three places apart yield a ratio of 23.6%.

Fibonacci Fans vs. Gann Fans

澳洲幸运5开奖号码历史查询:Gann fans are another form of technical analysis based on the idea that the market is geometric and cyclical in nature. A Gann fan consists of a series of trendlines called 澳洲幸运5开奖号码历史查询:Gann angles. These angles are superimposed over a price chart to show potential 澳洲幸运5开奖号码历史查询:support and resistance levels. The resulting image is supposed to help technical analysts pr🍷edict prꦜice changes.

Gann fans are named after their creator 澳洲幸运5开奖号码历史查询:W.D. Gann, a 20th-century market theorist. Gann believed his angles could predict future price movements based on geometric angles of time versus price.

Fibonacci fans are derived from ratios while Gann fans are derived from a relationship between security price and time. The Fibonacci sequence is associated with the 6th century Indian mathematician, Virahanka. Later, it was introduced to the West ꧒by Italian mathematician Leonardo of Pisa, also known by the name Fibonacci.

The Bottom Line

Fibonacci fans are chart patters established using Fibonacci ratios. A fan's trendlines graphically depict possible support, resistance, and reversal levels for prices of securities.

Tra🐷ders use Fibonacci fans to gain an understanding of price trends and to plan entry and exit points for trades.