Fibonacci Sequence pt.2

Natural Existence

Fibonacci’s ratios are a part of technical analysis, so if we want to examine whether they exist naturally in the graphs, we have to look at periods of time that are outside of the technical analytical spectrum. The reason is that technical analysts are inclined to trade analysing short periods of time and so it is less likely that they would influence long term graphical patterns. Below is the graph of GBPUSD where each candle corresponds to 1 week and it is being analysed using the Fibonacci retracement tool.

Fibonacci Natural

There are clear signs in the graph that the ratios actually influence the graph; 0.236 is used as a line of resistance at point 1, then support at point 2. 0.382 is used as a line of resistance at point 3, and a line of support at point 4. Finally the 0.5 ratio is used as a line of resistance at point 5.

Having established that Fibonacci’s ratios may influence the graphs naturally, we do have to ask how relevant these are in actual day-to-day trading. It is unlikely that the natural presence of these ratios benefit the technical analyst, due to the fact that they span large periods of time.