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Learn To Trade Class #3 Plan Your Trade, Trade Your Plan “Fibonacci Ratio Analysis with Elliott Wave” 1.618 Today we will learn how to combine Fibonacci Ratio Analysis with EW for trading entries and exits. We will begin at 7:30 PM ET – You will hear no sound until we start Fibonacci “How many pairs of rabbits placed in an enclosed area can be produced in a single year from one pair of rabbits if each pair gives birth to a new pair each month starting with the second month?” - Elliott Wave Principle Fibonacci Pisano Bigollo (“Leonardo Fibonacci”) circa 1170 to 1250 discovered the Fibonacci sequence by breeding rabbits. Fibonacci #’s & Ratios The Fib sequence each # is the sum of the two #’s preceding it, starting with 0 and 1. - 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, etc. “God does not play dice with the universe.” - Albert Einstein Golden Ratio FIBONACCI 1.000 0.618 FIBONACCI 0.382 0.618 Fibonacci 0.382 0.618 Fibonacci #’s & Ratios Fibonacci #’s & Ratios The Fibonacci Sequence 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, etc Fib retracement ratios are the ratio of any # to it’s next higher #. Example : 0/1 = 0 (Starting Point) Example : 1/1 = 1 (Ending Point) Example : 1/2 = 0.50 (Major retracement level) Fibonacci #’s & Ratios The Fibonacci Sequence 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, etc Fib retracement ratios are the ratio of any # to it’s next higher #. Once we cross the fourth set of fib #’s the ratios start to narrow down to the inverse of the Golden Ratio – 0.618 Example : 2/3 = .6666 3/5 = .6000 5/8 = .6250 8/13 = .6153 13/21 21/34 34/55 55/89 = .6190 = .6176 = .6181 = .6179 89/144 144/233 233/377 377/610 = .6180 = .6180 = .6180 = .6180 Fibonacci #’s & Ratios The Fibonacci Sequence 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, etc. Extension Ratios 1.236, 1.500, 1.618, 2.0, 2.618 Derive Fib Extension levels by taking the ratio of any # to its next lower #. The sequence narrows down to the Golden Ratio – 1.618 Example : 1/0 = 0 1/1 = 1 2/1 = 2.000 3/2 = 1.500 5/3 = 1.666 8/5 = 1.600 13/8 = 1.625 21/13 = 1.615 34/21 55/34 89/55 144/89 = 1.619 = 1.617 = 1.618 = 1.618 Fibonacci #’s & Ratios 2.00 1.618 0.00 0.382 0.50 0.618 100.0 External Retracements Expansions -For exits on trend trades -For entries on counter trend trades Retracements -For entries Fibonacci Retracements Retracements ratio’s are used to analyze corrective Waves 38.2% …. by measuring previous motive waves 61.8% 100% 100% Fibonacci Retracements + Helps determine the completion of a Correction + Serves as potential Entry levels for trades in the direction of the larger trend Key Ratios ˃ 23.6% ˃ 38.2% ˃ 50.0% ˃ 61.8% ˃ 78.6% Fibonacci Retracements 5 0.00 3 B 0.382 4 1 0.50 A 0.618 C 2 0.786 100.0 Retracements for Entry 1. Identify a completed 5-wave impulse & anticipate a 3-wave correction 2. Measure impulse wave to define retracement levels 3. Watch for the end of correction for entry Motive Waves Already Completed » » » » Wave 1 Wave 3 Wave A Wave W Corrective Waves To Study With Retracements » » » » Wave 2 Wave 4 Wave B Wave X Motive Wave Tip Quickly access the Trading Analysis Fib ratios within the wave count Motive Wave Tip Access the default Fib ratios from the components panel External Retracements 127.2% 261% Ext. Ret. ratio’s are used to analyze motive waves …. by measuring previous corrective waves. External Retracements + Helps determine the completion of a motive wave + Serves as potential Exit levels for trades in the direction of the larger trend + Serves as potential entry for contra-trend trades Key Ratios 127.2 % 161.8 % 200.0 % 261.8 % 423.6% External Retracements 2.00 1.618 3? 1.272 5 1 3 1.00 B 2 1 4 2 0.618 0.000 A Extensions for Exit 1. Identify a completed correction & anticipate a new impulse wave 2. Measure corrective wave to define extension levels C 3. Watch for the end of correction for entry Corrective Waves Already Completed » » » » Wave 2 Wave 4 Wave B Wave X Motive Waves To Study With Extensions » » » » Wave 3 Wave 5 Wave C Wave Y Motive Wave Tip Quickly access the Trading Analysis Fib ratios within the wave count Motive Wave Tip Access the default Fib ratios from the components panel Fibonacci Expansions 200% Expansions are used to measure motive waves …. by measuring previous motive & corrective waves. Fibonacci Expansions + Helps determine the completion of a Motive wave (W.1,3,5,A or C). + Serves as potential Exit levels for trades in the direction of the larger trend, or entry levels against the trend. + Serves as potential entry on counter-trend trades Key Ratios 38.2 % 61.8 % 100.0 % 161.8 % 200.0 % 261.8 % 423.6% Fibonacci Expansions 1.618 1.000 0.618 5 Click 2 3 1 4 2 Click 1 B Click 3 A C 0.000 Expansions for Exit 1. Identify a completed Motive & Correction & anticipate a new 5-wave motive. 2. Measure (click) the 3 end points of the Motive & Corrective Wave. 3. Watch for the end of the Motive wave at Expansions ratios for exit. Corrective Waves Already Completed » » » » » » Wave 1,2 Wave 3,4 Wave 1-3 Wave A,B Wave W,X Any 2 adjacent waves in a triangle Motive Waves To Study With Extensions » » » » » » Wave 3 Wave 5 Wave 5 Wave C Wave Y Waves C, D, E Motive Wave Tip Quickly access the Trading Analysis Fib ratios within the wave count Motive Wave Tip Access the default Fib ratios from the components panel » A Fib zone is at least two Fib ratios in close proximity to each other » Combine all Fib tools: retracements, extensions & projections to calculate a Fib Zone » F.S.Z = Fib Support Zone – with a completed wave pattern, these are buying opportunities » F.R.Z = Fib Resistance Zone – with a completed wave pattern, these are selling opportunities