This shows you the differences between two versions of the page.
| Both sides previous revision Previous revision Next revision | Previous revision | ||
|
chart_analysis:fibonacci_fan [2019/09/07 00:04] betseyp [SharpCharts] |
chart_analysis:fibonacci_fan [2023/09/15 22:39] (current) jayanthi [Fibonacci Fan FAQs] |
||
|---|---|---|---|
| Line 2: | Line 2: | ||
| - | ===== Introduction ===== | + | ===== What Are Fibonacci Fans? ===== |
| - | Fibonacci Fan lines are trend lines based on Fibonacci retracement points. Rising fan lines extend up from a trough and pass through retracement based on the advance (trough to peak). These fan lines can then be used to estimate support levels or potential reversal zones. Falling fan lines extend down from a peak and pass through retracements based on the decline (peak to trough). These fan lines can then be used to estimate resistance levels or potential reversal zones. This article will explain the Fibonacci ratios and provide examples using Fibonacci Fans to project support and resistance. | + | Fibonacci Fan lines are trend lines based on Fibonacci retracement points. Rising fan lines extend up from a trough and pass through retracement based on the advance (trough to peak). These fan lines can then estimate support levels or potential reversal zones. Falling fan lines extend down from a peak and pass through retracements based on the decline (peak to trough). These fan lines can then estimate resistance levels or potential reversal zones. This article will explain the Fibonacci ratios and provide examples using Fibonacci Fans to project support and resistance. |
| ===== The Sequence and Ratios ===== | ===== The Sequence and Ratios ===== | ||
| Line 23: | Line 23: | ||
| //....the proportion of .618034 to 1 is the mathematical basis for the shape of playing cards and the Parthenon, sunflowers and snail shells, Greek vases and the spiral galaxies of outer space. The Greeks based much of their art and architecture upon this proportion. They called it the golden mean.// | //....the proportion of .618034 to 1 is the mathematical basis for the shape of playing cards and the Parthenon, sunflowers and snail shells, Greek vases and the spiral galaxies of outer space. The Greeks based much of their art and architecture upon this proportion. They called it the golden mean.// | ||
| - | ===== Calculation and Drawing ===== | + | ===== How Can You Draw and Calculate Fibonacci Fans? ===== |
| **Rising Fibonacci Fan** | **Rising Fibonacci Fan** | ||
| Line 30: | Line 30: | ||
| * Fan Line 3: Trough to 61.8% retracement | * Fan Line 3: Trough to 61.8% retracement | ||
| - | {{:chart_analysis:fibonacci_fan:ffan-1-spyup.png|Chart 1 - Fibonacci Fan}} | + | {{:chart_analysis:fibonacci_fan:ffan-1-spyup.png|Rising Fibonacci Fan Lines using StockCharts.com}} |
| - | Chart 1 shows the S&P 500 ETF with rising Fibonacci Fan lines. The lines are based on the March 2009 trough (low) and the April 2010 peak (high). The horizontal pink lines show the Fibonacci Retracements Tool extending from trough to peak. It takes two points to draw a line. The first point for each fan line is based on the low. The second points are based on the Fibonacci retracements. Notice how the Fibonacci Fan lines start from the trough and pass through these Fibonacci retracements (blue arrows). | + | Chart 1 shows the S&P 500 ETF with rising Fibonacci Fan lines. The lines are based on the March 2009 trough (low) and the April 2010 peak (high). The horizontal pink lines show the Fibonacci Retracements Tool extending from trough to peak. It takes two points to draw a line. The first point for each fan line is based on the low. The second point is based on the Fibonacci retracements. Notice how the Fibonacci Fan lines start from the trough and pass through these Fibonacci retracements (blue arrows). |
| **Falling Fibonacci Fan** | **Falling Fibonacci Fan** | ||
| Line 39: | Line 39: | ||
| * Fan Line 3: Peak to 61.8% retracement | * Fan Line 3: Peak to 61.8% retracement | ||
| - | {{:chart_analysis:fibonacci_fan:ffan-2-spydown.png|Chart 2 - Fibonacci Fan}} | + | {{:chart_analysis:fibonacci_fan:ffan-2-spydown.png|Falling Fibonacci Fan lines using StockCharts.com}} |
| Chart 2 shows the S&P 500 ETF with falling Fibonacci Fan lines. The lines are based on the April 2010 peak (high) and the July 2010 trough (low). The horizontal pink lines show the Fibonacci Retracements Tool extending from peak to trough. It takes two points to draw a line. The first point for each fan line is based on the high. The second points are based on the Fibonacci retracements. Notice how the Fibonacci Fan lines start from the peak and pass through these Fibonacci retracements (blue arrows). | Chart 2 shows the S&P 500 ETF with falling Fibonacci Fan lines. The lines are based on the April 2010 peak (high) and the July 2010 trough (low). The horizontal pink lines show the Fibonacci Retracements Tool extending from peak to trough. It takes two points to draw a line. The first point for each fan line is based on the high. The second points are based on the Fibonacci retracements. Notice how the Fibonacci Fan lines start from the peak and pass through these Fibonacci retracements (blue arrows). | ||
| - | ===== Interpretation ===== | + | ===== How Do You Interpret Fibonacci Fans? ===== |
| - | After an advance, the Fibonacci Fan lines can be drawn to identify potential support or reversal areas. Once a pullback starts, the fan lines provide chartists with key levels to watch as prices correct. After a decline, the Fibonacci Fan lines can be drawn to identify potential resistance or reversal areas. Once the bounce starts, the fan lines provide chartists with key levels to watch as prices bounce. As with regular trend line, support or resistance zones extend as the Fibonacci Fan lines extend, which makes them dynamic, not static. | + | After an advance, the Fibonacci Fan lines can be drawn to identify potential support or reversal areas. Once a pullback starts, the fan lines provide chartists with key levels to watch as prices correct. After a decline, the Fibonacci Fan lines can be drawn to identify potential resistance or reversal areas. Once the bounce starts, the fan lines provide chartists with key levels to watch as prices bounce. As with regular trend lines, support or resistance zones extend as the Fibonacci Fan lines extend, which makes them dynamic, not static. |
| ===== Rising Fan Lines ===== | ===== Rising Fan Lines ===== | ||
| Line 83: | Line 83: | ||
| {{:chart_analysis:fibonacci_fan:ffan-9-spyextend.png|Chart 9 - Fibonacci Fan}} | {{:chart_analysis:fibonacci_fan:ffan-9-spyextend.png|Chart 9 - Fibonacci Fan}} | ||
| - | ===== Conclusion ===== | + | ===== Final Thoughts ===== |
| - | Fibonacci Fans are used to identify potential support, resistance or reversal points. As with the Fibonacci Retracements Tool, these reversal points assume that the move is corrective in nature. A pullback after an advance is deemed a correction that will find support well above the initial trough. A bounce after a decline is deemed a counter-trend rally that will hit resistance well below the initial peak. Fibonacci Fan lines allow users to anticipate the ending points for these counter-trend moves. | + | Fibonacci Fans identify potential support, resistance, or reversal points. As with the Fibonacci Retracements Tool, these reversal points assume that the move is corrective. A pullback after an advance is deemed a correction that will find support well above the initial trough. A bounce after a decline is deemed a counter-trend rally that will hit resistance well below the initial peak. Fibonacci Fan lines allow users to anticipate the ending points for these counter-trend moves. |
| - | Like all annotation tools, Fibonacci Fan lines are not meant as a standalone system. Just because prices approach an arc does not mean they will reverse. Prices move right through these lines in many cases. No indicator is perfect. This is why chartists must use other tools to confirm support, resistance, bullish reversals and bearish reversals. | + | Like all annotation tools, Fibonacci Fan lines are not meant as a standalone system. Just because prices approach an arc does not mean they will reverse. Prices move right through these lines in many cases. No indicator is perfect. This is why chartists must use other tools to confirm support, resistance, bullish reversals, and bearish reversals. |
| ===== SharpCharts ===== | ===== SharpCharts ===== | ||
| Line 96: | Line 96: | ||
| To learn more about how to add this annotation to your charts, check out our Support Center article on [[https://support.stockcharts.com/doku.php?id=chartnotes:line_studies#fibonacci_fans|ChartNotes' Line Study Tools]]. | To learn more about how to add this annotation to your charts, check out our Support Center article on [[https://support.stockcharts.com/doku.php?id=chartnotes:line_studies#fibonacci_fans|ChartNotes' Line Study Tools]]. | ||
| + | |||
| + | ===== Fibonacci Fan FAQs ===== | ||
| + | ==== What are Fibonacci Fan lines? ==== | ||
| + | Fibonacci Fan lines are trend lines based on Fibonacci retracement points that help to estimate support and resistance levels or potential reversal zones. | ||
| + | |||
| + | ==== What do Fibonacci Fan lines represent on a chart? ==== | ||
| + | These fan lines represent potential support, resistance, or reversal points on a chart, helping you anticipate counter-trend moves. | ||
| + | |||
| + | ==== How are rising fan lines distinguished from falling fan lines? ==== | ||
| + | Rising fan lines extend up from a trough, based on the advance from trough to peak, while falling fan lines extend down from a peak, based on the decline from peak to trough. | ||
| + | |||
| + | ==== Do Fibonacci Fan lines guarantee reversals at those points? ==== | ||
| + | No, Fibonacci Fan lines are not meant as a standalone system, and just because prices approach a fan line does not guarantee they will reverse at that point. It's essential to use other tools and indicators to confirm potential support, resistance, and reversals. | ||
| + | |||
| + | ==== What is the difference between logarithmic (log) and arithmetic scaling in charting? ==== | ||
| + | Log scaling treats price changes as percentage moves, making larger percentage changes appear more significant. Arithmetic scaling, on the other hand, focuses on the absolute price change, making equal dollar moves look the same regardless of percentage. | ||
| ===== Further Study ===== | ===== Further Study ===== | ||