But we call it our “Trading Hail Mary.” It’s one of the only tools we like to use when we want to minimize our risk in a trade while maximizing our profits.
So, what the heck are Fibonacci numbers? While it may sound like an Italian pasta, this trading strategy could help you predict the perfect entry and exit timing for your next trade.
Fibonacci numbers were developed hundreds of years ago and are used by investors to create technical indicators. They look something like this:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55 and so on.
The pattern of numbers is created by taking the previous two numbers and adding them together (so 0+1= 1, 1+1= 2, 2+1=3 and so on). We can then break the pattern down into ratios and use that to help indicate where the stock market is going to move.
This type of trading is a hot topic for investors to argue over since the ratios don’t exactly correlate to certain trades…