Glossary

Fibonacci theory

Some analysts use the Fibonacci sequence and its ratios to attempt to forecast and interpret the rhythms of markets.

In 1202, medieval mathematician Leonardo of Pisa - nicknamed Fibonacci - came up with an elegant sequence of numbers in which each number equals the sum of the two before it in the series. It starts with 0, to which you add 1 to get the next number, 0 + 1 = 1; then just carry on, so 1 + 1 = 2; 1 + 2 = 3; 2 + 3 = 5. It quickly reaches huge figures.

The sequence appears in nature - for example, in the head of a sunflower or in pine cones - as well as in mathematical theory and design. The theory is that, in markets, interesting things happen at Fibonacci-sized intervals, so analysts use the sequence and its ratios to forecast and interpret the rhythms of markets.

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