understanding financial jargon
The Fibonacci Series is a number sequence first created by Leonardo Fibonacci in the early 13th Century. It is reputed that Fibonacci
became interested in the reproduction of rabbits which were destroying crops in Italy at that time. He created an imaginary set of ideal
conditions under which rabbits could breed, and posed the question, "How many pairs of rabbits will there be a year from now?". The
first few elements of the resulting number series is as follows;
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, ...
The next number in the Fibonacci series is extended by simply taking the last two adjacent numbers and adding them together. For example the next numbers will be 55 + 89 = 144, 89 + 144 = 233 and so on. A set of ratios can be derived from this number series which seem to have some relevance within nature and also some interest relating to the financial stock market. For example if you take two adjacent numbers and divide the smaller by the larger the result tends to converge on the value 0.618 (or 61.8% when expressed as a percentage). This is known as the Golden Ratio and has been linked with leaf dimensions on trees, skeletal dimensions in humans, as well as price movements in stock price charts.
Other ratios can be derived by taking two numbers in the series separated by one other (for example 13 and 34) and dividing the smaller by the larger to obtain the value 0.382 (or 38.2%). In the financial world traders use the Fibonacci Retracement pattern, which is based on these and other ratios, to estimate where resistance and support prices may be located on a share price graph.
What to do if you need more help
If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.
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