FIBONACCI TIME ZONES
FIBONACCI TIME ZONES
How to use Fibonacci Time Zones
Fib Time Zone is a technical analysis tool consisting of a series of vertical lines which extend along the time (horizontal) axis.
Fibonacci time zones only indicate potential areas of importance related to time. No regard is given to price.
The base interval is set by drawing a trend line between price highs or lows. The Time Zone tool then plots a series of vertical lines at increasing intervals.
Fibonacci Time Zone parameters are defined by the Fibonacci Sequence. Starting with 0 and 1, each number is the sum of the two prior numbers (1+2=3, 2+3=5, 5+8=13 8+13=21 etc…).
The main function of the Fibonacci Time Zone tool is to forecast or anticipate potential reversals based on elapsed time.
The first few Fibonacci numbers create relatively tight Fibonacci Time Zones at the beginning of the chart. Because of this it may be necessary to ignore the first few zones. After the first few zones, the zones expand quickly and allows some breathing room as the sequence unfolds. The basic theory behind Fib Time Zones is that potential reversal points can be found by looking ahead to the starting point of new zones.
Traditional Fibonacci Retracement
Fibonacci Retracements are an extremely popular tool in technical analysis. They are created by first drawing a trend line between two extreme points. The vertical distance between those two points is then divided up vertically with horizontal lines placed at key levels at the key Fibonacci Ratios of 23.6%, 38.2%, 61.8% and 100%.
The main use of these levels is that they act as levels of support and/or resistance when price is retracing back from an original advance or decline. These are key levels to take note of when price is correcting or experiencing a counter-trend bounce. The idea is that after an initial move (either a decline or an advance), price will often retrace back towards the direction it came from. The areas or levels defined by the retracement values can give the analyst a better idea about future price movements. Remember that as price moves, levels that were once considered to be resistance can switch to being support levels. The opposite is also true.
