Finance and the Fibonacci Sequence By Benjamin R

Finance and the Fibonacci Sequence By Benjamin R. Hull

History • Leonardo of Pisa (1170 -1240) – Financial engineer; analyzed business problems – Brought Arabic Number system to the West • Liber Abaci (1202) – Tools to calculate present value, compound interest, geometric series… – Rabbit problem • First western appearance of Fibonacci sequence

Liber Abaci

Rabbits!

The Golden Ratio •

The Fibonacci Sequence •

Technical Trading • Pioneered by Charles Dow • A Random Walk Down Wall Street – Burton G. Malkiel – Cannot predict future trends based on past ones – Spread of information – Crowd instinct and mass psychology • Individuals want to break even ($40 to $50 drop example) • Price rise causes bandwagon effect

Strategy • Identify trends and act based on possible future movements • Support and Resistance – Lines represent potential turnaround points – Support: Price passes and continues rising – Resistance: Price does not pass and drops

Fibonacci Ratios •

Pictures

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Sources Books: • • • “Fibonacci and the Financial Revolution”, Goetzmann, William N. , The Origins of Value (pages 123 -144). Oxford University Press Inc. , New York, 2005. “Fibonacci Numbers”, N. N. Vorobev, Addison Wesley, Massachusetts, 2 nd Edition, 1994. “A Random Walk Down Wall Street”, Malkiel, Burton G. , W. W. Norton and Company, New York, 6 nd Edition, 1996. “Technical Analysis from A to Z”, Achelis, Steven B. , Mc. Graw Hill, New York, Second Edition, 2001. “Fibonacci and Lucas Numbers, and the Golden Section”, S. Vajda, Halsted Press: a division of John Wiley and Sons, New York, 2 nd Edition, 1994. Pictures and Other Sources: • • • http: //upload. wikimedia. org/wikipedia/commons/thumb/a/a 2/Fibonacci. jpg/220 px-Fibonacci. jpg http: //en. wikipedia. org/wiki/File: The_Parthenon_in_Athens. jpg http: //www. mathacademy. com/pr/prime/articles/fibonac_8. gif http%3 A%2 F%2 Fupload. wikimedia. org%2 Fwikipedia%2 Fcommons%2 F 04%2 FLiber_abbaci_magliab_f 124 r. jpg&h=z AQFTteev&s=1 http: //upload. wikimedia. org/wikipedia/commons/1/1 c/Fibretracement. png http: //stockcharts. com/school/doku. php? id=chart_school: chart_analysis: fibonacci_fan http: //www. landlearn. net. au/newsletter/2008 term 3/images/rabbit-family-tree. png http: //theinsanium. blogspot. com/2011/01/fibonaccis-rabbits. html http: //en. wikipedia. org/wiki/Fibonacci_retracement http: //blog. afraidtotrade. com/wp-content/uploads/112208 -2335 -fibonacci 13. png