The Fibonacci Sequence Is Everywhere—Even the Troubled Stock Market
by Elizabeth Landau/Smithsonianmag.com
On Friday, as the U.S. stock market closed out its worst week since 2008 amid coronavirus-related turmoil (before recovering somewhat early this week), investors were left with a glaring question: Is it all downhill from here? Amid such economic turbulence, some market researchers look to a familiar, powerful set of numbers to predict the future.
“Fibonacci retracement” is a tool that technical analysts use to guide their outlook about buying and selling behavior in markets. This technique is named after and derived from the famous Fibonacci sequence, a set of numbers with properties related to many natural phenomena. While using these numbers to predict market movements is a lot less certain than using it to calculate sunflower seed patterns, the appearance of the sequence in the field of finance is yet another testament to its power in capturing the human imagination.
What is the Fibonacci sequence?
The Fibonacci sequence is a famous group of numbers beginning with 0 and 1 in which each number is the sum of the two before it. It begins 0, 1, 1, 2, 3, 5, 8, 13, 21 and continues infinitely. The pattern hides a powerful secret: If you divide each number in the sequence by its predecessor (except for 1 divided by 0), …read more: