In the 1700’s a Japanese man named Munehisa Homma, a trader in the Osaka rice futures market, developed a method of technical analysis to analyze the price of rice contracts known as candlestick charting. Homma used Sakata’s Five Methods, patterns derived from rules used by local traders from his hometown of Sakata, as the foundation for
Fibonacci Retracements are displayed by locating two extreme points, a trough and opposing peak. Five lines are drawn: 100% (the high on the chart), the second at 61.8%, the third at 50%, the fourth at 38.2%, and the last one at 0% (the low on the chart). These price levels often correspond to areas of
Fibonacci Fan Lines are displayed by first drawing a trendline between two extreme points, a high and low. An invisible vertical line is drawn through the second extreme point. Three lines are then drawn from the first extreme point (the leftmost point) passing through the invisible vertical line with their slopes at the Fibonacci levels,
Fibonacci Arcs are created on a chart by first drawing a trendline between two extreme points, a trough and opposing peak. Three arcs are generated that are centered on the second extreme point and intersect the trendline at Fibonacci Levels, usually of 38.2%, 50% and 61.8% of the distance between a price maximum and minimum.
Introduced by George Lane the stochasic process is derived from the idea that as prices increase, closing prices are often closer to the upper end of the price range. Conversely, in downtrends the closing price tends to be near the lower end of the trading range.