Quote:
Originally Posted by Jamie Saettele
Following up on my last post....the EURJPY just reversed off of the 61.8. whether or not this top holds is another question but this does show just how well fibonacci works..the eurjpy dropped 90 pips in 29 minutes
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Nice catch, Jamie.
I thought it worthwhile to expand further on why the 61.8% and the 161.8% Fibonacci retracements are considered the most significant.
The standard sequence of Fibonacci numbers goes like this..
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, 4181, 6765, 10946, 17711, 28657, 46368, 75025, 121393
Whereby you add the two previous numbers to get the next in the sequence.
If we take the ratios comparing two consecutive numbers in the sequence, we see that the first number will be 61.8% of the second and the second will be the inverse, or 161.8% of the previous figures. Hence the "golden ratio" that occurs in nature. Hence the reason why we believe that the 61.8% and 161.8% are the most significant Fibonacci retracement and projection figures in technical analysis.
