Fibonacci

The Fibonacci number series: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144,

233, 377, . . . is both additive, as each number is the sum of the previ-

ous two, and multiplicative, as each number approximates the previous

number multiplied by the golden section ratio. The ratio becomes more

precise as the numbers increase. Inversely, any number divided by its

smaller neighbor approximates 0.618 or phi (1).

While traders with rudimentary knowledge know they can add,

subtract, divide, and multiply Fibonacci ratios to obtain another Fibo-

nacci ratio,11 they often do not apply this knowledge in their chart

analysis. As an example, traders during the Nasdaq crash in 2000 and

2001 would have had no means to determine a price target low if they

only knew how to calculate price support levels by subdividing the

extreme price high and historic low into the ratios of 61.8 percent,

50 percent, and 38.2 percent.

In Figure 1.4, we see the monthly chart for the Nasdaq Composite

Index. Range A begins at the price high and ends at a price low signif-

icantly higher than the market low. The price low selected in 1998 was

a significant decline, but was not the historic low, which would have

made the problem we are about to discuss worse. Traders who simply

subdivided the range as defined by range A would witness the market

falling through the 61.8 percent support zone and not know what to

do to identify new targets. A retracement of 61.8 percent is the decline

that occurred relative to the full price range selected. Traders and ana-

lysts could further subdivide the range between the 61.8 percent level

of A and the price low first selected to obtain additional Fibonacci

ratios.12 They in turn could find additional support levels by dividing

the range marked C into the ratios 38.2 percent, 50.0 percent, and

61.8 percent. We could further subdivide range D. Each of these addi-

tional subdivisions shows that the Nasdaq Composite respected the

ratios identified. Any Fibonacci ratio that is added, subtracted, multi-

plied, or divided will produce another Fibonacci ratio. Many traders

Customer Reviews

A deep and informative book. For advanced studies only.
Constance Brown is a very intelligent person. I said that first because this is not the type of investing book that deals in general market tactics and strategies that most people write and can write. If you read this book you might find yourself(as I did) going back and reviewing things before you get the hang of it.

Fibonacci systems are not easily understood if they are to be implemented correctly. This book covers all you'll need to understand and implement Fibonacci systems in your technical analysis, except for the software obviously. Like she says in the book, don't feel discouraged if you don't get it right away. Keep at it and keep researching and tempering your skill.

I wish Mrs. Brown would write a series on Technical Analysis(she mentions other topics that she would like to write about in the book). She has written other books but I'd like to see them republished or some written anew.

All-in-all a great book. Not for beginners. Definitely rewarding.

Pluses: A first(or near it) of it's kind. Deep subject reviewed and explained. Author has authority and knowledge on subject.

Minuses: Book might be out of reach for some leading to disappointment. Definitely requires study to fully understand.

Only for the serious student (as they say)
Fibonacci seems to be an area of technical analysis that is very poorly covered in the literature. There are several books but many of them are by writers of newsletters (and the books often spend page after page on historical irrelevant detail). This doesn't automatically make the books bad, but it is likely that the author will hold back certain information.

This book is not for beginners. I would buy Robert Miner's book to get the received wisdom on Fibonacci retracements and extentions. Then I would experiment trading on those ideas for a couple of years. Anything above this level isn't in the public domain and you have to be prepared to spend a lot of time doing research. If you want to learn more you can consider buying this book or another specialised book (Greenblatt or Boroden). But be aware: The further you read this book the more opaque it becomes. I think you also need to subscribe to the author's newsletter. So this author does hold back information, but in the earlier chapter the writing is fairly straightforward and some testable ideas are presented.

Personally I have decided not to go down this route. I do believe there is value in basic Fibonacci ratios, but there is too much mysticism in the advanced literature for my comfort. Maybe I'm missing something, but I take the risk.

I've still given this book 3 stars because I suppose it is cutting edge and if you are interested in the area it is worth getting other people's ideas for forward your own thinking.

I have written several short reviews on trading books. The best way is to compare the score on the books I've read. Many reviews on amazon.com are just glorious 5 star reviews. I use all five categories; sorry but everything isn't "great". Books rated 5 are very good. Books rated 4 are good solid books well worth reading. Books rated 3 can be bought by some people who read a lot or have very specific needs. Books rated 1 or 2 I would not recommend buying or reading. Naturally all in my humble opinion.

Another Invaluable Book by Connie Brown
There are many market analysts who discredit the value of
Phi/phi as their scans show only incidental occasions when
prices reverse at those popular "retracement" levels.

Connie Brown, who has mastered the teachings of W. D. Gann, R. N. Elliott, and many other's theories, is to be complimented for sharing many of her discoveries in yet another great little book. From her world travels she also adds insights into the historic uses of "The Sacred Mean", or "Golden Ratio", that is found in great art masterpieces, architecture and, most importantly, nature.

Connie offers concrete evidence as to reasons that some practioners do not find value in these studies.

It is my opinion that this book will be of special value to "discretionary" traders, those who have developed a holistic view of the markets using elements of multiple analytical approaches, rather than to the "system" trader. In other words, personal work (reason) is essential to employing these methods successfully.

It is my hope that Connie's revelations will lead to
even further discoveries in the understanding of the
ebb and flow of mass market psychology as there is still much to be learned.