How to Spot Tradeable Tops or Bottoms

Would you like to have gone short the S&P at 1,369, bought back the S&P at 1,259 and squared your long positions at 1,345?

If so, consider how Fibonacci can enhance your trading/investment decisions.

If you think Fibonacci was just a crazy Italian mathematician, consider this: The May 2 high at 1,370 and the June 16 low at 1,258 occurred right against Fibonacci resistance/support.

What exactly is Fibonacci? How do you calculate Fibonacci levels? Why do Fibonacci levels work? What's the evidence? How do you trade with Fibonacci?

This article is going to be a bit longer than my normal articles, but hang in there; it will be well worth your time. The answer to the questions above might be the single most important investment secret you've ever read.

What exactly is Fibonacci?

Fibonacci, a 12th century Italian mathematician, was the first to mathematically express an aesthetical proportion that has fascinated and influenced mankind for thousands of years.

This proportion is known as Phi or the Golden Mean and is derived from the Fibonacci sequence. The Fibonacci sequence starts out like this:

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.

Each number of the sequence is the sum of the two preceding numbers. The ratio of each successive pair of numbers in the series approximates Phi. The ratios of successive numbers in the series quickly converge on Phi. After the 40th number in the series, the ratio is accurate to 15 decimal places. Fibonacci numbers have certain defining properties:

Division of the preceding number by the subsequent numbers tends to 0.618. Division of the subsequent number by the preceding number tends to 1.618. Division of a number by the second preceding number tends to 2.618.

Division of a number by the second subsequent number tends to 0.382.

Fibonacci Everywhere

The Golden Mean is found in the universe, humans, animals, plants, DNA, music, the bible, ancient architecture, and biology. On your next leisurely stroll notice how many flowers are adorned with a Fibonacci number of petals. (more)