Fibonacci Time Projection
From The Free Forex Encyclopedia
Fibonacci time projection days are days on which a price event is supposed to occur. Time projection analysis is not lagging but is of forecasting value. Trades can be entered or exited at the price change rather then after the fact. The concept is dynamic. The distance between two turning points is seldom the same, and time projection days vary, depending on larger or smaller swing sizes of the market price pattern. This base for drawing this shape is 2 critical points: two highs, two lows or a low and a high. Fibonacci levels are projected into the future based on those points and at this time it is impossible to say whether those levels mark peaks or valleys. If price is declining or rising approaching a given Time Projection level, it is likely this level will mark an end or a pause of a particular trend. It is always recommended to combine Time Projection with other Fibonacci tools for more dependable signals.
Fibonacci time projection is one of the four most popular Fibonacci studies for technical analysis, involving the use of Fibonacci time zones. Fibonacci time zones are generated by dividing a chart into a number of time areas, based on the Fibonacci sequence. As an example, if the base increment is taken to be an interval of one day, Fibonacci time zones would occur around 1.618 days after that day, then 2.618 days after that, then 4.236 and so on. Each interval is multiplied by the golden ratio, 1.618, in order to generate the next interval. These Fibonacci time zones are used to predict large price events, whether reversals of a current price trend or sharp changes in price along with the trend.
Fibonacci time projection is accurate to a point, but in a few cases large price events occur significantly before or after the time predicted by the Fibonacci time projection. Although this only describes about 30% of cases, Fibonacci time projection should only be used in conjunction with other technical analysis tools, and as a guideline for trading rather than a sure-fire method of divining the future.