Understanding the Financial Market charts using ancient mathematics legacy.
The Fibonacci Sequence is the series of numbers:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, …
- The next number is found by adding up the two numbers before it.
- The 2 is found by adding the two numbers before it (1+1)
- The 3 is found by adding the two numbers before it (1+2),
- And the 5 is (2+3),and so on!
Here is a longer list:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, 4181, 6765, 10946, 17711, 28657, 46368, 75025, 121393, 196418, 317811, …
Can you figure out the next few numbers?
In terms of application Fibonacci number appears in nature often.
The number of petals on a flower is typically a Fibonacci number.
are the number of spirals on a sunflower or pineapple tends to be a Fibonacci number as well
In fact, there is much more application of Fibonacci numbers but what
I find most inspirational about them is their NUMBER PATTERN
square each Fibonacci number
One square is one
Two squares is four
Three squares is nine
Five square is twenty-five. And so on
Now no wonder when you add previous two number you get next Fibonacci number.
Try doing the following.
Add the squares together(refer the below picture)
And the pattern continues.
6, 15, 40, 104 are not Fibonacci numbers
But if you look closely you will see Fibonacci number buried inside that.
Let’s look at the following equation.
why should the square of
Let’s understand by drawing a simple picture
Let’s start with one by one square next to that draw another one by one square together
one by two rectangle.
below that draw two by two square and three by three square
five by five square and eight by eight square
creating one giant rectangle.
Now say what is the area of a rectangle.
from first point the “It’s the sum of the areas of square inside it.
and another point is
The area is equal to its hight*base
and the height is clearly 8.
and the base is 5+8 which is the next Fibonacci number 13.
hence the square of 1,1,2,3,5,8 add up to 8 times 13.
Continue this process to generate rectangles of 13*21 & 21*34 and so on
Now divide 13/8=1.625
and if you divide the larger number by smaller number these ratio gets closer and closer to about 1.618
Known to many peoples as
THE GOLDEN RATIO
The number which fascinated mathematician, scientist, and artist for centuries.
All this explains to us clearly there is so much these Fibonacci numbers can do while trading.