Friday, November 8, 2013

Managing by Fibonacci



I am not much of a chartist when it comes to managing portfolios.

Over the years I have heard numerous of presentations by technical analysts who believe that studying charts, and finding patterns, is the best way to managing money.

Some of these technicians have been able to earn a pretty good living from using charts to trade stocks, but unfortunately I have not been able to do so consistently.

There is one exception, however, and that it when it relates to Fibonacci numbers.

Fibonnaci was a mathematician who lived centuries ago.  He discovered a series of numbers that seemed to be mathematically repeated in nature.  This video which appeared on TEDx does a good job of describing the whole concept:




At the top of this post, I have shown the movement of the S&P 500 over the past 5 years.  Included on this chart are the various Fibonnaci support and resistance levels.

Even if you are skeptical, you can see that the market does seem to move in Fibonnaci patterns.

Not necessarily a way to successfully manage money, but fun nonetheless.