Elliott Wave and Fibonacci 101

When some traders hear about Elliott Waves, they also find themselves in a discussion of Fibonacci proportions. Frequently it's tricky to read much about Elliott Waves without understanding the different ratios that are typically used in the reckless or corrective phases of the market. But , what's the real benefit of using Fibonacci proportions with Elliott Waves?

Fibonacci ratios can be used with almost any type of chart pattern. And, since Elliott Waves have a singular pattern of their own which can also be derived from a price chart, they fall into the category of technical analysis which can gain benefit from the use of Fibonacci proportions.
One of the advantageous aspects of Fibonacci ratios is that it allows the trader to measure the prevailing market swing and compared to swings or patterns which came before it. So, this type of analysis is in stark contrast to the kind of analysis that one would derive from a standard stochastic or moving average type indicator. However, as the Fibonacci ratios are employed in the prevailing information that is being displayed on the chart, the system conform itself to the prevailing information available to the trader.
Since Elliott Waves are often described a collection of sequences, it allows the trader to comprehend the current state of the market and predict what occurs next. This can be quite advantageous to traders to maybe expecting the release of some impending stories or market report.

When the Elliott Waves and Fibonacci ratios mixed together, they allow a trader to add a dimension of understanding to his trading that's not generally found in other types of trading methods. By this, I mean that the strategy permits the trader to predict what could occur next in the market based primarily on what's occuring now. And, it allows traders to appreciate how far the market can actually move and still remain in the relative balance of normalcy based on the most recent moves in the market.

Clearly new traders can gain benefit from understanding up Elliott Waves and Fibonacci ratios. However, if the person persists, the forward-looking aspects of these kinds of methodologies can have sustaining benefits long outside the first efforts to learn them.





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