Think back a few years to high school and you will likely remember lessons dealing with the Golden Ratio and Fibonacci ratios.
For those needing a little refresher, Fibonacci numbers are a sequence of numbers where each is the sum of the two preceding numbers (1,1,2,3,5,8,13,21,34 and so forth). This sequence of numbers forms various ratios including the infamous “Golden Ratio” which is .618. Other common Fibonacci ratios include .382, .500, .618, .786 etc.
Advocates of Fibonacci ratios point to the tendency of markets to mimic natural science so likewise, expect the ratios to hold true for investing as well. These ratios form the basis for critical points in the market and allow investors to forecast buying or selling opportunities once they identify the ratio sequence. Traders use Fibonacci ratios to predict the next high or low for a market or stock. The Fibonacci ratio in finance and the stock market is fully explained in this video by INO.TV.
Interested in learning more about Fibonacci ratios or want to test the theory without risk? Sign up for a virtual portfolio with HowTheMarketWorks.com and see for yourself it it really works or not
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