In the previous chapter, we learned a lot about Japanese candlestick patterns, at the end of the discussion we will continue trading with Fibonacci.
Certainly for experienced traders, already know what Fibonacci is.
As analysis tool used by traders available on the MetaTrader 4 trading platform
But many traders don’t know the history of Fibonacci
In this discussion, we will try to do a flashback about the history of Fibonacci.
TenkoFX broker, a brokerage firm that serves forex traders to trade on the forex, CFD and crypto trading markets.
Regulated by the International Financial Services Commission (IFSC) of Belize.
Leonardo Fibonacci biography
Leonardo Fibonacci, with the original name Leonardo da Piza or Leonardo Pisano, was born in 1175 and died in 1250.
His name is better known as Fibonacci. Leonardo da Pisa, here we call Fibonacci is a mathematician from Italy.
His best-known work is the Fibonacci sequence.
Fibonacci introduced the writing of Arabic numbers in the European region.
The name Fibonacci means the son of Bonacci.
Bonacci is his father’s nickname.
His father’s real name is William Guglielmo, but people are familiarly calling him Bonacci, which means a simple person who has good qualities.
Fibonacci’s father works as a trade agent representative in North Africa.
By often interacting with parts of North Africa, Fibonacci knows mathematics learning.
In Fibonacci’s mind, Arabic numbers are easier to understand than Roman numbers.
Finally, Fibonacci was interested in studying the Arabian peninsula.
At the age of 27 years, Fibonacci wrote a book called Liber Abaci which means calculation book.
The book reviews how simple, effective the writing of Arabic numbers.
Some of the better unit conversions in this book, especially in matters of trade.
Of course, this will make buying and selling easier.
Europeans accepted his book, thus opening up European minds to start using Arabic arithmetic.
In 1240 Fibonacci was an honored guest of Emperor Frederick II. As a tribute to Fibonacci, Fibonacci gets a salary.
Fibonacci succeed in making a book called Liber Abaci.
The writing is used in Hindu and Arabic languages.
The book is the beginning of changes in Jewish, Greek and Roman numerals in calculations.
The book contains how to determine the number of digits in the multiplication of tens and multiplication and so on.
Included in this book are some numerical algebra problems such as roots, quadratic equations, and linear equations.
A book is a form of writing renewal at that time.
The book contains practical questions and real applications in everyday life.
This is what made this book very popular at that time despite the superiority of the contents of the book itself.
The book covers economic issues too.
Like how to determine profit margins, currency conversion and how to calculate interest.
Fibonacci sequence history
In 1225, Fibonacci published the book Liber Quadrotorum.
This book for Emperor Frederick.
This book discusses the quadratic.
In this book the first time the problem of finding Fibonacci numbers through illustrations of lambing rabbits.
Besides Fibonacci also introducing the number 0 in Europe, he obtained from the results of learning Arabic.
(Remember zero was discovered by Al Khawarizmi, an Arabic mathematician.)
Until now one of the works for the analysis of foreign currency trading (Forex)
One of these forex indicators uses the name Fibonacci.
So actually who is founding of the Fibonacci sequence, then the correct answer is his real name is Leonardo da Pisa or Leonardo Pisano.
Fibonacci sequence nature
Maybe not many people know that Fibonacci actually only make perfects of mathematicians from India, Gopala Chandra.
If the Gopala problem is how to distribute goods quickly using a bag, it is different from the Fibonacci problem
Fibonacci gets its inspiration in discovering the magic of the Fibonacci sequence from the rabbit breeding problem.
Fibonacci mate a pair of female and male rabbits then place in an isolated cage.
Then he counts how many pairs of rabbits produce if the next rabbit is productive.
The results obtained are quite surprising. Apparently, the population continues to grow with the same ratio.
And the final result is 144 pairs, which is the 12th row. How can that be?
From the trial he found the Fibonacci sequence with series 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, …, etc.
The series result by starting from calculating the numbers 1 + 1 = 2, then 2 + 3 = 5, 5 + 8 = 13, etc.
The sequence starts from 0 and 1, then the next number is obtained by calculating two previous numbers.
What’s interesting about the Fibonacci sequence, if we divide one number by one number after the result obtained is a decimal value of 0.618 (with rounding).
Examples are as follows:
2: 3 = 0.667 3: 5 = 0,600 5: 8 = 0.625 8: 13 = 0.615 13: 21 = 0.619 21: 34 = 0.618 34: 55 = 0.618 55: 89 = 0.618 89: 144 = 0.618
Then if we reverse the division, in the following way:
13: 8 = 1,625 21: 13 = 1.62 144: 89 = 1.62
The division of the next number will produce the same decimal number, and that is what is called the golden ratio.
Surprisingly, this Fibonacci sequence application appears real in nature.
An example is the number of daisies, sunflower nuclei, fluttering butterfly wings, and several other examples that can be read in the following article concrete technical evidence in nature.
Fibonacci sequence formula
Mathematically, the Fibonacci formula will look like this, where the Greek phi letters are described as golden ratios:
Geometrically, if you describe it, the Fibonacci ratio or Golden Ratio, it will look like this.
The scientists then examined this golden ratio.
Finally, they found a lot of compatibility between things in the universe with the golden ratio.
And finally reinforced the opinion that the creation of the earth and its contents are not random and just happen, but there are definite and constant calculations in it.
Compliance with the composition of the human body
From studies using the golden ratio (1,618), they found a lot of evidence of the anatomy of the human body.
If you measure face length then divide by face width then the result is 1.618.
And if comparing the distance between the navel and the sole of the foot with 1 unit, then one’s height is 1,618 units.
Or 1 unit (the distance of the navel-soles of the feet) + 0.618 units (the distance of the navel to the tip of the head).
Researchers also found the golden ratio in the structure of the human lung.
In the comparison between right (short) bronchia and left (right) bronchia which always amounts to 1: 1,618.
And there is much more credible evidence that shows the magic of the Fibonacci series and the golden ratio in the human body.
Match natural proportions
Besides in the human body evidence of the golden ratio also exists in natural objects around nature.
For example in the pattern that arranges sunflower seeds which turns from the center of the flower to the outer part following the arrangement of the golden ratio.
This structure also exists in snowflakes, using a tool such as a microscope will see a pattern that follows the golden ratio as a beautiful snowflake constituent form.
The golden ratio which in its development compiles this spiral shape also illustrates the growth process of many living things taking place also in the form of a logarithmic spiral.
The shapes of the spiral arch are always the same and the basic shape never changes regardless of size.
There is no form in mathematics that has this property.
In addition, there are still many forms and calculations in nature that turn out to be in accordance with the Fibonacci sequence and golden ratio.
Estimating the center of the world
Through this golden ratio number, finally, many opinions conclude that Mecca is the center of the earth because the proportion of the distance between Mecca – North Pole and the distance between Mecca – South Pole is exactly 1.618.
In addition, the proportion of the distance between the South Pole and Mecca with the distance between the two poles is again 1,618 units.
The fact also shows that the proportion of the distance between East and West Mecca is 1,618 units.
Besides that, the proportion of the distance from Mecca to the solstice line from the west side and the perimeter of the world latitude at that time was also surprisingly the same as the golden ratio of 1.618 units.
Fibonacci sequence forex
In trading with Fibonacci how to use Fibonacci is not based on the sequence of numbers, but based on the distance between numbers in the series.
For example, the number 89 on the Fibonacci sequence, if divided by 144 right after that, will come out the number 0.6180 (61.8%).
Furthermore, if the number 89 is divided by the second number after that in the Fibonacci sequence, the number 0.3819 (38.2%) will come out and so on.
Based on these rules, Fibonacci Retracement levels and Fibonacci Extension levels are obtained which can surprisingly explain price movements when applied to the price chart.
Therefore, traders use Fibonacci in forex trading as a technical analysis tool.
Fibonacci retracement level
In trading with Fibonacci retracement refers to the area of support and resistance in forex in technical analysis, which uses horizontal lines to describe retracement levels
Fibonacci retracement consists of a sequence of levels of 0.236, 0.382, 0.500, 0.618, 0.764.
In different versions, these figures can appear in the format of percentage to 23.6%, 38.2%, 50.0%, 61.8%, and 76.4%.
Fibonacci retracement indicators are very useful by taking two points at high and low on a timeframe, it will automatically draw retracement levels on a chart.
Fibonacci Extension Levels
In trading with Fibonacci, basically, Fibonacci extensions are technical tools used by traders, to predict how far prices will continue to move in the direction of the main trend after experiencing a temporary retracement.
Keywords need to be the main trends and projections of price movements.
Fibonacci extension level is a level to determine profit targets and estimate how far after the retracement
Common Fibonacci levels are 61.8%, 100%, 161.8%, 200%, and 261.8%.
The Fibonacci extension shows how far the next price wave can move following the pullback.
Fibonacci ratios found in everyday life, seen in galaxy formation.
Architecture, and how some plants grow, are the reasons for Fibonacci for financial analysis.
Extension rates indicate areas which may be important, but which should not be relied on with certainty.
It turned out that Fibonacci was originally a mathematical calculation by Leonardo Da Pisa who conducted trials on rabbits, which the results of the experiment were surprising because it produced a Fibonacci sequence.
And amazingly the Fibonacci series theory exists in everyday life from the formation of galaxies and some flowers and plants.
And the anatomy of the human body has the golden ratio of the same magnitude even though in increasing numbers.
Implementation trading with Fibonacci in the financial markets using the golden Fibonacci ratio basis using Fibonacci retracement levels of 23.6%, 38.2%, 50.0%, 61.8%, and 76.4%.
And Fibonacci extension or some call it Fibonacci expansion with general level 61.8%, 100%, 161.8%, 200%, and 261.8%.
Thus the history of the Fibonacci trading series, henceforth we will review more deeply about Fibonacci in the next article, stay tune with Tenkofx.co.za.