Dear Fellow Trader:
Happy Financial Freedom Friday!
Option trading and financial dreams: Life leads you, and all of us, on journeys you would never have expected earlier in life. It’s fascinating that you outgrow what you thought you couldn’t life without, and then you fall in love with what you never knew you wanted. Your journey leads you along trails you never knew existed for you. So don’t be afraid. You’ve got this. Option trading may be new, but it is doable! Go for it!
Here’s What Is Covered Below:
- What are Fibonacci Numbers?
- Why are They Important?
- Learn to Use the Numbers
- Incorporate Fibonacci Principle into Your Trading
Friday is education day. My goal is to teach everyday people (like me) to successfully trade options. I do my best to write in an understandable way as if we are talking while sitting on my deck in a relaxed atmosphere.
The trading tools you select and use are important, and can make your trading easier and more effective. Today, I am discussing Fibonacci Numbers.
Last week, we discussed Moving Averages and the information they provide on a stock’s chart to help suggest a stock’s upcoming price movement.
I am going to post images further below of a couple charts, but first I want to discuss the concept of Fibonacci, so you understand what this means and how to use the information.
For all of you who know me and perhaps, even for those who do not know me well, a characteristic that is pretty obvious is that I believe in and often express positivity. I feel (actually, I know) that if I am feeling bad, down, grouchy, upset, depressed, miserable, unworthy- (you get the idea) then that is the energy I am drawing to myself and, in a sense, I will be proven right, that is what I will get more of. (If I was often grouchy, I’ll bet you can imagine me saying, “Gez, I knew that was going to happen because nothing works out for me.) Knowing that we draw what we focus on, I do my very best to be joyful, happy and know that I deserve the very best and guess what I get? You got it, I am happy, joyful, 99.9% of the time and wonderful things continually happen.
So, what does this have to do with Fibonacci Numbers? The first record of Fibonacci Numbers (Divine Proportion Numbers) dates back to 200 BC. They were again discovered by Leonardo of Pisa in 1202 as he pondered the end “family” result of a pair of rabbits. Yes, right, they multiply. Now I know this seems to have nothing to do with the stock market, but in a way it does because those numbers are found throughout nature and all of creation. It is hard to find a number that doesn’t fit.
Fibonacci numbers are 1 + 2 = 3, 2 + 3 = 5, 3 + 5 = 8, and so on- so, we have 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233…
These numbers relate to our DNA. It is found in the number of leaves on a stem, petals on a flower, tree branches, insect body parts, portions of our human body (1 nose and mouth, 2 eyes, arms and legs, 1 belly button, etc. The numbers are found in seashells, spirals of galaxies, harmony of music, genealogy of a bee, chemical elements, the behavior of light and atoms. It goes on and on, so why not incorporate these Universal numbers into our option trading chart set-up?
So, rather than select a moving average (MA) or an exponential moving average (EMA) of 7, 9, 10- long ago I decided to use 8, rather than 15, I use 13. The difference is minimal, but for me I am aligning my trading chart with Universal principles. There is little difference between an 8 or 9 or 10 EMA, but in my head, I am incorporating Universal principles that put me and my trading with Divine Proportion Concepts.
Having used these EMAs for years, I am still amazed how they can work like exact ceilings and floors and when they cross it is significant.
Look at the charts below with candlesticks and note the areas where the lines touch, but don’t cross or when there is a cross, perhaps of a candlestick, it then draws back. This information, seeing an EMA overhead, below, or a cross imparts information that can be incorporated in your trading decisions.
Check out these charts:
Stockcharts.com
Stockcharts.com
Again, it is interesting how these Fibonacci numbers act as ceilings (overhead resistance) and floors (support). Because the Fibonacci tell a story about price moves and their strength and possible areas that will stop a move upward or offer support in a drop, I want those lines on my chart to share the details and tell their story.
Using Fibonacci numbers or the Divine Proportion Concept is my way of incorporating my positive outlook and aligning with the higher principles of the Universe in my trading.
I feel it is super important for people, you and I, to experience a joyful life. The best way to find “joy”, which you’ll discover is just as true for finding success or money, is to focus less on the “results” of a life well lived and more on the life well lived. Stay in the moment. Experience joy now. Simple is as simple does.
I wish you the very best,
Wendy
Wendy your a champ. Thank you for always being willing to share with us.