Fibonacci and Elliott Wave

Welcome to

The Traders & Investors Club ODL Securities Tuesday, 17th March 2009

www.tradersandinvestorsclub.co.uk

Fibonacci and the

Elliott Wave

Euclid & The Golden Ratio

Who Was Euclid?

Who Was Euclid? Lived in Alexandria circa 300 B.C. Studied in Athens under Plato Elements - a 13-volume mathematical textbook Discovered the Golden Ratio

Euclid And The Golden Ratio

(Phi)


1.618

0.618








Fibonacci & The Golden Ratio

Who was Fibonacci?

Who was Fibonacci?

Born Leonardo da Pisa in 1175AD Published the Liber Abaci in the 1200s Introduced the decimal system to the West Discovered the ‘Fibonacci Sequence’

So What? Why is Fibonacci relevant today?

How would you trade this?

Fibonacci And The Golden Ratio

Begins with 0 and 1…. We then add the previous two numbers in order to get the next number in the sequence…….. 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.


Mathematical Properties of the Sequence 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. Divide any number by the one before it, e.g 55/34 The answer is always close to 1.618 Divide any number by the one after it, e.g 12/34 The answer is always close to 0.618


Further Properties of the Sequence 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. The ratios of alternate numbers, e.g. 21/55 Approach a constant of 0.382


Further Properties of the Sequence 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. The inverse ratios of alternate numbers, e.g. 55/21 Approach a constant of 2.618


Fibonacci Ratios

0

1 / 0.618

=

1.618

0.382 0.5 0.618

1 / 1.618

=

0.618

0.618 x 0.618

=

0.382

100 161.8 200 261.8

SqRoot of 1.618 =

0.618

Inverse of 0.618 =

0.382

1.618 x 1.618

2.618

=

Harmonic Fibonacci Ratios

Phi

=

1.618

Reciprocal of Phi

=

0.618

SqRoot of 1.618

=

1.272

SqRoot of 0.618

=

0.786

Reciprocal of 1.272

=

0.786

SqRoot of 5

=

2.236

Fibonacci Levels With Harmonics Extensions %:

261.8 223.6 200 161.8 1.272

Retracements %:

100 78.6 61.8 50 38.2 0

Fibonacci Retracements

Fibonacci Extensions

A Brief Introduction To

Elliott Wave

Who Was Elliott?

Ralph Nelson Elliott Born 1871 in Marysville, Kansas In 1929, he became an invalid devoting himself to study of the stock market Called the 1935 market bottom Published Nature's Law - The Secret Of The Universe at the age of 75

The Elliott Wave

Identified by Ralph Nelson Elliott during the 1930s Elliott Wave Theory is a direct descendant of Dow Theory Crowd behaviour trends and reverses in recognisable patterns Elliott isolated thirteen ‘waves’ or patterns of directional movement These waves are created by ‘crowd psychology’ which is forever shifting between optimism and pessimism Elliott Wave is fractal in nature

The Elliott Wave

The complete eight-wave cycle comprises a five-wave impulse followed by a three-wave correction In a bull market, the five-wave impulse is up and the three-wave correction is down In a bear market, the five-wave impulse is down and the three-wave correction is up

Impulse

Wave

The Elliott Wave

5 b

3

4

1

2

a c

Some Elliott Wave Rules

5 b

3

4

1

a

2 Wave 2 never retraces 100% of Wave 1

c


5 b

3

4

1

a

2 Wave 4 never overlaps Wave 1

c


5 b

3

4

1

a c

2 Wave 3 is usually the longest but never the shortest


5 b

3

4

1

a

2 Waves 1 & 5 tend towards equality

c


5 b

3

4

1

a

2 Waves 2 & 4 tend towards equality

c


5 b

3

4

1

a

2 Triangles nearly always form in Wave 4

c


5 b

3

4

1

a c

2 Wave 3 is usually the steepest and strongest


5 b

3

4

1

a c

2 Wave 5 always has less momentum than Wave 3

Elliott Wave Channel Technique

Elliott Wave Channel Technique

Brent Crude Weekly Chart

Corrective

Wave


5 b

3

4

1

a

2 Waves a & c tend towards equality

c


5 b

3

4

1

a

2 Triangles nearly always form in Wave b

c


5 b

3

4

1

a

2 Wave c must exceed Wave a swing low

c


5 b

3

4

1

a c

2 a-b-c correction confirmed when Wave b peak exceeded

Brent Crude Weekly Chart

5

b

a c

a-b-c correction confirmed when Wave b peak exceeded

The Fractal Nature Of

Elliott Wave

The Fractal Nature Of Elliott Wave

5 b

3 5 3 4

1

1 2

2

4

a c


5 2

3

b

1 4 3 5

4

1

2

a c


5 b

3 b a c

4

1

2

a c


5 b

3

4

1

a c

2 a-b-c correction confirmed when Wave b peak exceeded


1 5 b

3

4

1

a c

2 2

Fibonacci & Elliott Wave

Fibonacci & The Elliott Wave



Retracements

38.2% 50% 61.8% 78.6%

Extensions

38.2% 50% 61.8% 78.6%

Fibonacci & Elliott

In Action

FSTE100 Weekly Bars

FSTE100 Weekly Bars

FSTE100 Weekly Bars

FSTE100 Weekly Bars

FSTE100 Weekly Bars


FSTE100 Weekly Bars

The Elliott Oscillator

The Elliott Oscillator

Similar formula to the MACD A 5-period EMA* minus a 35-period EMA*

*Exponential Moving Average


5 b

3

4

1

a c

2 Wave 5 always has less momentum than Wave 3

FSTE100 Weekly Bars

Wave 2

Wave 4

Fibonacci Finding The Bottom

FSTE100 May 2001 Weekly Bars

FSTE100 May 2001 Weekly Bars

Fibonacci Day Trading The DAX

Day Trading The DAX With Fibonacci













The Elliott Wave

Man’s progress does not occur randomly but rather in a ‘three steps forward, two steps back’ fashion Periods of setback are necessary for human progress The Financial Market is a perfect reflection of mass psychology

Welcome to

The Traders & Investors Club ODL Securities Tuesday, 17th March 2009

www.tradersandinvestorsclub.co.uk

Fibonacci and Elliott Wave

Recommend Documents