Fibonacci Time Zones

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DEFINITION of 'Fibonacci Time Zones'

An indicator used by technical traders to identify periods in which the price of an asset will experience a significant amount of movement. This charting technique consists of a series of vertical lines that correspond to the sequence of numbers known as Fibonacci numbers (1, 2, 3, 5, 8, 13, 21, 34, etc.). Once a trader chooses a starting position (most commonly following a major move) on the chart, a vertical line is placed on every subsequent day that corresponds to the position in the Fibonacci number sequence.

Fibonacci Time Zones

INVESTOPEDIA EXPLAINS 'Fibonacci Time Zones'

Fibonacci numbers are a sequence of numbers where each successive number is the sum of the two previous numbers. For reasons unknown, these numbers play an important role in determining relative areas where the prices of financial assets experience large price moves or change direction. The four popular Fibonacci studies are arcs, fans, retracements and time zones.

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RELATED FAQS
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  2. How are double exponential moving averages applied in technical analysis?

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  3. How do you know where on the oscillator you should make a purchase or sale?

    Common oscillator readings to consider making a buy or sale are below 20 or above 80, respectively. More aggressive investors ... Read Full Answer >>
  4. What are the alert zones in a Fibonacci retracement?

    The most commonly used Fibonacci retracement alert levels are at 38.2% and 61.8%. A 50% retracement level is also commonly ... Read Full Answer >>
  5. How was the Fibonacci retracement developed for use in finance?

    The use of Fibonacci retracements in stock trading was popularized by noted technical analysts W.D. Gann and R.N. Elliott. ... Read Full Answer >>
  6. How reliable is the Fibonacci retracement in predicting stock behavior?

    The use of the Fibonacci retracement is subjective. There is no objective method to verify one application of the Fibonacci ... Read Full Answer >>
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