The Fibonacci sequence, named for its discoverer Leonardo Fibonacci, forms the basis for Elliott Wave theory used in trading financial markets. Out of Elliott Wave theory comes Fibonacci retracements and Fibonacci arcs discussed below. The Fibonacci sequence is 1,1,2,3,5,8,13,21,,34,55,89… to infinity. The sum of two consecutive numbers equals the next number. The ratio of any number to its next highest number approaches .618. The ratio of alternating numbers approaches .382. Also, 1 – .618 = .382. The midpoint of .382 and .618 is .50. This is why .382, .50, and .618 are used.

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