Instructions

Understand what the Fibonacci sequence and the Fibonacci ratio are. The Fibonacci sequence is simply adding each number to the previous one. For example: 1, 1, 2, 3, 5, 8, 13, 21, 34. The Fibonacci ratio is 0.618 or its inverse, 1.618. This ratio is also called phi, the golden mean, the golden ratio or the divine proportion. Phi is derived by dividing a number of the sequence by its successor or predecessor.

Draw five horizontal lines on a stock’s trading chart, with 0 percent being at the lowest point, and 100 percent at the highest point. Draw in lines at 38.2 percent, 50 percent and 61.8 percent. These lines are used to do retracements on a stock’s history, and can indicate the old and new support and resistance levels.

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