Fibonacci Spiral and Fibonacci Time Projection

The Fibonacci Spiral and Fibonacci Time Projection is among the popular Fibonacci Studies on the Forex market. Using these two methods in combination help traders to determine powerful support and resistance levels of the market along with time prediction. While the Fibonacci Time Projection is quite common and its rules are clear, the Fibonacci Spiral strategies can be  used in different ways. That is why some traders may have very accurate results from the Fibonacci Spiral, for example, institutional traders, while others may not succeed with it. Let’s have a closer look what is the Fibonacci Spiral in Forex.

 

Fibonacci Spiral

 

To make the Fibonacci Spiral, you should first pick up a Starting Point. It is up to you what point to choose. Then you calculate the key Fibonacci ratios for the certain key price levels of the market. Let’s consider the example. Fibonacci Ratios can be calculated as follows.

We take the ratio of two successive numbers in Fibonacci series (1, 1, 2, 3, 5, 8, 13 and so on) and divide each by the number before it. Finally we have got the following series of numbers:

 

¹/₁ = 1,   ²/₁ = 2,   ³/₂ = 1·5,   ⁵/₃ = 1·666,   ⁸/₅ = 1·6,   ¹³/₈ = 1·625,   ²¹/₁₃ = 1·61538.

Selecting the starting point is however a difficult task. Basically, we select some very strong support/resistance level, which is very obvious and then we expand our spiral from that point with the help of Fibonacci ratios. Now after drawing our Fibonacci Spiral, we are able to forecast the critical price levels on the chart, where the major market events like price reversals, huge spikes etc. are highly expected. So we can forecast the movement of the market at certain times using the intersection of the spiral with the chart grid.

Thus, with the help of Fibonacci Spiral, we can find an optimal relation between the price and the time and can effectively and efficiently predict the crucial volatility levels of the market. Every point on the Fibonacci Spiral gives us an intersection of some particular price and time. The market shows a significant activity at those intersection points and the spiral keeps guiding us about this as it also keeps growing on the same path with the time.

Fibonacci Time Projection

The Fibonacci Spiral can be reconfirmed by the Fibonacci time projection analysis. If we get Double-Co-incident signal from both of these Fibonacci strategies, we get more confidence to initiate our trade. The Fibonacci Time Projection analysis involves selecting a “decent” and a “strong” swing movement of the asset for a given time. This swing movement may be selected on a simple criteria also like by taking Two High + Two Lows Or by taking One High + One Low but the size of the swing should be a decent one.

Then the Fibonacci levels of time are estimated based on these two critical levels of the market and multiplying the further values with the Golden Fibonacci Ratio of 1.618 and so on. Though Fibonacci Time Projection is a good tool to forecast the important times of the market, where the significant movements are highly expected in the price of the asset. But in some cases, it has been observed that the significant events get happened a little bit earlier or a little bit after the anticipated time, hence giving a disappointment to the traders. So, for a better accuracy and eliminating the false signals, it is advisable that the Fibonacci Time Projection analysis should be used in conjunction with the Fibonacci Spiral Analysis and with other supportive data like Stochastic etc.

 

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