Finance

Fibonacci Sequence In Analysis And Moving Averages

Fibonacci Sequence In Analysis And Moving Averages

One of the most popular indicators for crypto technical analysis is the Fibonacci tool. It is used for measuring the price activity of any given cryptocurrency. It clearly shows the rise and fall in prices. The Fibonacci tool allows technical analysts to deduce important info about price directions and general investment decisions. Let’s find out more.

Fibonacci Sequence: All You Need To Know

Who invented the Fibonacci Sequence?

Leonardo Fibonacci was a famous Italian mathematician who lived in the Middle Ages. He introduced the Indo-Arabic number system (1,2,3…….) to Europe in his mathematics book “Liber Abaci ” published by Fibonacci. The patent for the Fibonacci sequence belongs to the Italian mathematician Leonardo Fibonacci.

Fibonacci Sequence

  “ 0, 1, 1(1+0), 2(1+1), 3(2+1), 5(3+2), 8(5+3), 13(8+5),21(13) +8)…”

The sequence of numbers we see above is the Fibonacci sequence. Each number is equal to the sum of the two preceding numbers. The golden ratio emerges as the numbers in the series are proportional to each other. That is, when a number is divided by the number before it, you get a sequence that gets closer and closer to the Golden Ratio. After the number in the 13th place in the series, this number is fixed and it is called the ” Golden Ratio”.

How to use Fibonacci?

Fibonacci, which enables measuring price movement in crypto money, makes it easy to determine price directions in technical analysis. In technical analysis charts, price activity progresses in waves and if these prices rise after a certain level, profit sales are made. After this point, the Fibonacci retraces. Because the Fibonacci graph pulls from the top to the bottom. In a surge, there is a pullback from the starting point to the ending point. After these pullbacks, the retracement of the Fibonacci shows what percentage of the investment vehicle has been taken back on the chart.

How to calculate Fibonacci?

Fibonacci tools are an algorithm with purely mathematical operations. These tools used to show price activity are calculated as follows;

The basis of Fibonacci is the ratio found by squaring the numbers in the Fibonacci sequence. The highest level in this series is 618 and the lowest level is 382. A Fibonacci level of 0.5 means that it is half of the percent increase level.

The volatility of retracement levels is market-dependent. E.g; In a bull market, the Fibonacci retracement levels are at most 23% or 38%. Cryptocurrency investors, after the first drop in price activity, anticipate that prices may rise and buy at this level.

When using Fibonacci, calculations are made over 5 different ratios. These rates are; The levels are 23.6, 38.2, 50.0, 61.8, 78.6. In a volatile or stable market, levels can change. You can use the Fibonacci sequence to analyze the market and invest in crypto through platforms like bitcoin billionair.

What are the points to consider in Fibonacci?

There are a few points to note in the Fibonacci used in the chart. First of all, when the Fibonacci is pulled from the bottom to the corner, the values ​​shown to the right are of great importance for investors. The reason is that the values ​​on the right side are produced as a “support region”. Fibonacci measures over the main wave or by looking at the waves in between.

The chart is drawn from top to bottom, left to right while showing bearish fluctuations. Correcting upwards from the region where it has fallen makes it easier to predict which levels it will come to, that is, the resistance areas.

Wax needles are used when measuring in Fibonacci tools. The dots on the tips of the candlesticks shown in the chart mean that trading is done. These candlesticks measure the pulse of the market and provide an idea in the minds of investors. In other words, candlesticks are important in order to measure and understand market psychology.

Another advantage of using Fibonacci is that by looking at the chart, it shows which regions are support and which regions are resistance levels. This shows investors in which regions you can buy or sell.

Using only the Fibonacci tool on the chart, it is not possible to definitively decide whether certain regions are support or resistance. Although it is a frequently used tool, it cannot give a precise result as it is with other tools. New investors, until they fully understand the subject of technical analysis, have information about other tools and if they get support from expert traders at this stage, they can make healthier decisions when investing.

Is Fibonacci enough for Technical Analysis?

One of the most common mistakes made by novice traders who have just entered the market and have little knowledge of technical analysis is to make a decision by using an indicator or a pattern alone, which generally causes them to lose. The most important thing that investors should not forget is; An indicator or pattern alone cannot decide which direction the market will curve. This is the main reason why there are more than one indicator and each one is used for different purposes.

Fibonacci, like other indicators, cannot give precise results on its own. Although it gives important investment advice in some areas, it should not be considered as a final result. It is necessary to pay much more attention to this in markets where there is a dynamic or sharp decline. In order for investors to make the right decision, they need to have information about many indicators used in technical analysis and have an idea about how to use them. Otherwise, the opposite of the expectations will inevitably occur.

What is the Moving average?

It is the average price value of a currency in a specified time period. It is obtained by dividing the price movements by the number of days. For example, when calculating a 50-day moving average, all the closings of 50 days are added together and divided by 50. This is also called “Simple Moving Average”. Traders usually use 20, 50, 100, 200 levels when determining moving average levels. But some traders sometimes prefer levels like 7.22, 99 apart from these. The main purpose of the moving average is to determine the support and resistance level of money. So, what is the support and resistance level?

What is the Support Level?

The concept of support level is a technical analysis concept used in all financial markets. If the support level is defined in its most general form; This is the level at which the decline in prices is expected to stop. In its simplest form, it can be interpreted as waiting for buyers to react from this level as sales stop. When the important support levels are broken, that is, if the support points are passed, the sales accelerate and the support point now becomes the resistance point. For example, if the stop point of a cryptocurrency is 10, it is interpreted as the increase or decrease of this money after that.

What is the Resistance Level?

The resistance level is the point at which price spikes are expected to stop. If we talk about the resistance levels again in a simple way, it can be defined as the stopping or slowing down of the buying in financial products and waiting for the sellers to react from this level. This is also called profit realization.

What Happens If The Resistance Level Is Broken?

When we look at the historical charts of the markets, the most obvious thing is that the places where the buying stops and the prices can no longer go above this level are seen as the resistance level. So what happens if the resistance level breaks?

Breaking the resistance level does not mean that the prices are above the resistance level. When the resistance point is broken, buying accelerates. The resistance point becomes the support point after this point.

How Are Moving Averages Used in Buying and Selling?

Moving averages can be used on price charts in singles, pairs or more. When the averages cross each other, it is perceived by the analysts as a buy and sell signal. Average data is interpreted as “slow” when it occurs in the form of a long period, and as “fast” when it occurs in the form of a short period.  

Situations where single mean is used

In cases where a single average is used, a price line above the average is called a “buy signal”, and if it falls below the average, it is called a “sell signal”.

Cases in which the Double Mean is Used

In cases where double averages are used, the slow average crossing of the slow average is called the “buy signal”, and the downward cutting is called the “sell signal”.

The Importance of Moving Averages in the Financial Market  

The common aspects of the moving averages are in determining the trend and following the trend. This allows traders to leave their daily evaluations and get a simpler view. Identifying the trend is one of the most important details in how moving averages can increase the statistic of successful trading.

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