Good day, let me begin by welcoming the hundreds of new members who have just joined MarketClub in the last few weeks. I welcome you and wish you every success with MarketClub.

Today I would like to share with you one of the many lessons that are available to you as a MarketClub member.

Technical analysis has been around for a long time. It has been said that Japanese rice traders kept hand charts over 200 years ago to track the price of rice. More recently in the 50's, technical analysis began to gain acceptance, and the 70's could be called the golden age of technical analysis. Technical analysis is now widely regarded as mainstream, no longer do traders and investors think of technical analysis as Ouija boards and funny-sounding chart formations. Technical analysis is a serious tool that you can use to make money.

Fundamentals are important, but technical analysis, in my humble opinion, is more important because it provides you with timing which I think you'll agree is everything in life.

I'm going to be looking at one of my favorite indicators that can help you enter or exit a market on favorable terms. This tool also works extremely well with the market-proven Trade Triangle technology.

Today's lesson is on the Fibonacci Sequence.

Leonardo Fibonacci was a mathematician born in 12th century Italy. His study of Fibonacci numbers (a sequence of numbers where each number is the sum of the two previous numbers) is often applied in technical analysis to find support and resistance in stock charts.

This timeless lesson I learned many years ago when I was a member of the Chicago Mercantile Exchange trading in pits. It is one tool that has stood the passage of time and one that I still use today.

How this amazing 12th century Italian mathematician figured this out is way beyond my pay scale, but I can say without hesitation that it works.

Watch the lesson here and then leave a comment.

How To Use Fibonacci Retracements

The principle behind a Fibonacci retracement is that after a stock moves upward or downward, the price will often retrace or correct some of this movement. Many technical analysts believe that the amount of retracement will often correspond to one of the Fibonacci levels. The five horizontal lines represent percentages of 100%, 62%, 50%, 38% and 0% (with 62 and 38 being Fibonacci numbers).

The Fibonacci sequence works on intraday charts, daily charts, weekly and monthly charts. I do not know why it works in the financial markets. Through all my reading and research, I've never found a reason other than it works in nature.

I'm going to show you just how easy it is to use Fibonacci in your own trading.

This is one lesson you do not want to miss, it will open your eyes as to how and why markets move. One of the many benefits of Fibonacci retracements is that it will allow you to enter a position with very little risk. That is a big plus in today’s markets.

So enjoy and learn from this valuable lesson and yes, take a look at some charts after watching the video and apply what you learned using MarketClub's Fibonacci tool.

By all means, please feel free to share your findings on the blog with your fellow members. You can leave your comments and findings just below this post.

Every success with MarketClub,

Adam Hewison

President, INO.com

Co-Creator, MarketClub

Having an advanced working knowledge of the Elliott wave sequence and it's degrees of trend is a incredible addition to any trading plan. Combined with a fib "extension" tool that measures from wave origin, wave end and retrace end, all three data points, then projects probable waves 3 or 5 ends with fib's and price. I have 17 + yrs. trading experience and find this to be essential.

very nice lesson. thank you for teaching how to use the Fibonacci tool.

Tango do some reading about it! Gary Stonerrocker you poor misguided soul!

I think 62 and 38 are derived levels because the sequence is 34, 55 and then 89. Where 62 (actually 61.8) and 38 came from I do not know. Perhaps somebody can explain that.

Tango

61.8 comes from dividing a sequence number by the next sequence number like 34/55 = .618. And 38 comes from dividing a sequence number by one 2 away like 34/89 = .382. The number often used that has no mathematical Fib calculation is .50.

Can you refer me to any computerized backtests of the Fibonacci algorithm in any trading situation?

I can conceive of no market mechanism that would be so general.

Is there any theory that is even plausible as to why it should apply to markets?

With High Frequency trading now in the game ( even if is illegal) it is impossible for the average envestor to EVER WIN ! This is not a Fib.