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What Is the Legacy of Fibonacci?

Eva MarcilleVerified
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Summary：Explore the legacy of mathematician Fibonacci, who introduced the Hindu-Arabic numeral system and created the famous Fibonacci sequence. Learn how the sequence has influenced modern finance with its applications in Fibonacci retracement, extension, and time zones.

Introduction

Fibonacci, also known as Leonardo of Pisa, was amathematicianborn in the 12th century who introduced the Hindu-Arabic numeral system to the Western world. He is best known for his sequence of numbers, the Fibonacci sequence, which has been applied in various fields, including finance, trading, and investing. This article explores the legacy of Fibonacci and how his contributions have influenced modern financial markets.

The Fibonacci Sequence

The Fibonacci sequence is a series of numbers that starts with 0 and 1, and each subsequent number is the sum of the previous two numbers. The sequence goes like this: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, and so on. This sequence has some unique properties that have made it useful in many fields, including finance.

Fibonacci Retracement

One of the most popular applications of the Fibonacci sequence in finance is the Fibonacci retracement. The retracement is a technical analysis tool used to identify potential levels of support and resistance in a financial asset. The Fibonacci retracement levels are derived from the Fibonacci sequence and are calculated by dividing the difference between the high and low price of an asset by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8%, and 100%. These levels can be used by traders and investors to identify potential entry and exit points in the market.

Fibonacci Extensions

Another popular application of the Fibonacci sequence in finance is the Fibonacci extension. The extension is a technical analysis tool used to identify potential levels of price targets in a financial asset. The Fibonacci extension levels are derived from the Fibonacci sequence and are calculated by multiplying the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8%, and 100% by the distance between the low and high price of an asset. These levels can be used by traders and investors to set profit targets or identify potential areas of resistance in the market.

Fibonacci Time Zones

In addition to the Fibonacci retracement and extension, Fibonacci time zones are another technical analysis tool that uses the Fibonacci sequence. The time zones are used to identify potential areas of price reversal based on the time it takes for an asset to move from one price level to another. The time zones are calculated by dividing the length of time it takes for an asset to move from one price level to another by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8%, and 100%. These levels can be used by traders and investors to identify potential areas of price reversal and time their trades accordingly.

Conclusion

Fibonacci's contributions to mathematics have had a lasting impact on the world of finance. The Fibonacci sequence and its derivatives, such as the retracement, extension, and time zones, have become popular technical analysis tools used by traders and investors around the world. By understanding these tools and their applications, investors can make more informed decisions in the financial markets.

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Fibonacci sequenceFibonacci retracementFibonacci extensionFibonacci time zonesmathematician
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