The stock market is an unforgiving place for anyone who does not prepare well for decisive action. Anyone who believes that they can make a killing on stocks by instinct alone will find out very quickly that you cannot afford to take a slapdash approach to the medium. The very least that is required for anyone hoping to make a positive impact on their bank balance by playing the market is an awareness of how to understand data, and this awareness is aided hugely by an ability to decipher graphical representations of such data. The Fibonacci sequence and the numbers related to it have, improbably as it sounds, a lot to do with the stock market.
Countless graphical representations of the behavior of a stock are pored over before the committed investor makes a move in the market. A wise investor will not look at one method of representing data on a graph and make their investment simply based on that. In order to get a rounded interpretation it is important to analyze several forms of graphical representation. Graphs depicting the relationship between a stock’s behavior and the important Fibonacci numbers are, more and more, forming a major element of this dependence on graphical representation.
Whether by accident or design, the number .618 – related to what Fibonacci’s followers term the “Divine Proportion” or “Golden Ratio” – seems to hold significance in the stock market just as it does in art and in nature. Its inverse correspondent, .382, has a similar effect, although people are unsure why this is. Theories that have been advanced include the presence of superstition even in this most cynical of fields, and one that may just be the most likely – that the human brain is hardwired to respond to the Divine Proportion whether this response is conscious or subconscious.