Chart Your Way to Profits: The Online Trader's Guide to Technical Analysis with ProphetCharts, Second Edition

Chapter 15. Fibonacci Drawings

In all the many years I've been learning and performing technical analysis, there is no set of studies which has interested me more than those of Fibonacci. In ProphetCharts, there are four kinds of Fibonacci studies available: retracements, fans, time zones, and arcs. In this chapter we will explore each of these, as always, with actual examples from the recent past. But first, let us learn a little about the namesake of these studies.

A BRIEF HISTORY LESSON

Leonardo of Pisa lived from 1170 to 1250, and he is regarded as perhaps the greatest mathematician of the Middle Ages. His father, William, had the nickname "Bonaccio," which means good-natured, so Leonardo was subsequently known by the nickname of "Fibonacci" (short for filius Bonacci, or the son of Bonaccio).

William worked in North Africa at a trading post, and even though his home country of Italy had used the Roman numeral system for centuries, he came into contact with traders who instead used the Arabic method of numbers (which is what we use today—1, 2, 3, 4, and so forth, as opposed to numbers such as XI and MMC). Leonardo helped his father with his work, and in the course of doing so, he became acquainted with and enamored by the Arabic style of numbering, which seemed far more sensible and efficient than the Roman style. The world owes Leonardo a debt of gratitude for helping to popularize this system of numbers, since it's doubtful anyone today would appreciate having to use Roman numerals ...