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In this lesson, we're going to talk about Fibonacci as a trading indicator, and I tell you, a indicators
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go this is really hotly debated in the trading world.
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Some people love it, absolutely love it, really believe in it, embrace it, use it all the time.
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Others like I don't like this at all and they don't use it at all.
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And they just think it's kind of a little bit more mystical.
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And in some people think it's got mystical qualities in a good way because it's based on, you know,
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Fibonacci math.
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So all we're mathematicians out there watching and saying, yay, more math, Fibonacci.
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And people also tend to be can be a little bit more of an advanced indicator.
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By the way, the understanding the how it works is not too bad, but then applying it can be a little
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bit more tricky.
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And as we go through the lesson, you'll see how we do that and you can decide for yourself whether
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that's easy or hard for you.
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But the big idea with Fibonacci is you're trying to identify pullbacks or retracement.
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You're trying to see these different support levels and resistance levels.
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You're trying to, you know, see what might be going on in terms of, you know, mathematically what
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might be going on in terms of, you know, volatility or market sentiment type indicator.
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And the train platform will automatically calculate all these things for you as far as the actual,
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you know, feminazi and how you how you use that the platform, a calculator, for example, to do a
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math or calculations.
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And then you take what it calculates and you overlay that on top of the charts.
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That's working a little tricky is where you pick where you place it on the chart and will demonstrate
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that here for you coming up.
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So first off, it's actually pretty instructive to understand what is Fibonacci?
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You know, what is what is it?
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Where did it come from?
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What's the big idea behind that?
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So and it's hard.
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Fibonacci is basically math.
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It's a mathematical sequence of numbers as the sequence of numbers described by the mathematician Leonardo
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Paisano Bergoglio MacArthur, I don't know.
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But if that is a sequence of numbers that he discovered and came up with and it's a very well-established
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idea in mathematics, basically what you do is start with a zero and and one, and then you add each
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number in the sequence to the previous number to get the next number.
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It's a sequence of numbers.
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So if you look at the example here, this is the Fibonacci sequence.
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It's zero and one is one and then one and one is two and two.
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And one is three and three and two is five and so on as you keep going on out into infinity.
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So that's like that's how it works.
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It's a mathematical sequence of numbers.
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Kind of interesting that way.
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But how does that work for trading securities?
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Like, OK, that's nice.
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Well, if you look here from match, if you take how it's applied in trading, actually, again, you
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don't have to calculate this math, but it's good to understand the underlying why, because these numbers
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that you're going to see in the yellow are going to be important to us when we start actually using
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and trading.
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But basically with effeminately if you take any two adjacent numbers in the sequence and divide the
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lower number by the higher number and you keep going and you keep going and in this calculation and
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you'll approach the ratio of sixty one point eight, you know, as we approach this.
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So we're an example, five divided by eight to adjust numbers five and eight point six to five.
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Eight is next to thirteen point six one five.
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And everything starts approaching the sixty one point eight as kind of an accepted average for Fibonacci.
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And then you do the same.
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But instead of two using the two adjacent numbers you use to further along the sequence and they get
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along, they get close to thirty eight point two.
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So it'd be like, let's say instead of five and eight, it would be like to five and 13.
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And the same thing with three further along would be five and twenty one, for example, has to go further
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along and these are thirty eight point two percent and twenty three point six percent.
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So those numbers are actually very important because they're going to show us when we do our phenomenology
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overlay.
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These are these are important numbers are being used for making trading decisions on.
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So in training, the key numbers are zero seventy six point four, sixty one point eight fifty.
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And these are all percentages, fifty percent, thirty eight point two, twenty three point six and
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one hundred percent.
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And the levels these are the key numbers that they use.
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And we're going to talk about why they were chosen just a moment here.
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But the levels are calculated relation to the vertical distance between the high and the low.
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You're looking at it as a percentage basis.
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So it's a zero to one half percent is the full trading range of, let's say, a security.
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And then there's percentages based on between zero and one hundred percent.
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Again, these are not prices that that's sixty one point eight rupees or dollars or whatever it might
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be, euros it's or thirty eight point two or anything like that.
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It's a percentage, sixty one point eight percent would be an example of a number in our trading range.
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Are we using Fibonacci now?
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First off, you might look at that and say to yourself, well, wait a minute.
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Now, these numbers, not all are truly Fibonacci.
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I saw some of them were, but not all of them were truly from anatsui.
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So let's talk about that for a second.
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So the zero and the one percent represent the high and the low price, you know, the high and the low
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price.
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So need that kind of use that from a trading aspect.
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So it's not truly from an arbitrary fifty percent.
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You sometimes see in there, sometimes it's out of there, sometimes it's in there, depending on your
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trading.
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Platform, but 50 percent is based on another theory, actually.
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It's a Dow theory that says a trend has a good chance of continuing once there has been at least a 50
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percent retracement in that there's a 50 percent turns around, you can see that the trend will tend
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to continue in that and once that retracement of 50 percent has happened.
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So that's where you see the 50 percent on top of that.
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More in a second here.
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And there's only six point four percent, not Fibonacci, but that's basically taking one hundred percent
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and subtracting a Fibonacci number, twenty three point six.
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And that kind of developed over time by Fibonacci trading supporters.
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They wanted that that that number.
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And there is another indicator, another level of another level to look at.
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So that's that's where they kind of came in.
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So you have true Fibonacci and then trading over time has developed add a little bit more to it to make
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it more of a complete indicator is the idea behind it.
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So the idea is in the theory behind trading, Fibonacci is of a security has shot up over a period of
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time and it's starting to pull back or starting to pull back.
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There will be support at the Fibonacci levels, you know, below that high.
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So if it's gone up and starting to come back, you have these different phenomenology levels that we
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just talked about.
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And then as it approaches them, if there's a chance it's going to rebound, go and go back there.
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Likewise, if a stock has fallen and bounces back, starts to bounce back up, you'd see resistance
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at the Fibonacci levels as far as, you know, seeing seeing resistance to going above a Fibonacci level.
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So it's looking at, you know, going above or below, looking like at those, you know, support and
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resistance lines.
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So using the concept of spawn resistance lines, you're basically adding that into Fibonacci level.
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So we'll take a look about how that's actually applied here in these in these graphs here.
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See that a little bit better in action.
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