Tools: Fibonacci Ruler

The Fibonacci sequence involves the use of ratios, and the two ratios that are focused on in this trading tip are 1.618 and 2.618.  Time can be forecast by measuring the horizontal time period between two points A and B, and multiplying by the Fibonacci ratios.  The result is plotted rightward from point A.

Fibonacci time projections can be made from top to top, bottom to bottom, or top to bottom.  Because of the multiplicity of swing tops and bottoms, there is the problem of a multitude of possible relationships.  One solution to the problem is to use this tool in conjunction with other time-oriented information, such as Elliott wave counts or cycle analysis.

The following chart illustrates three Fibonacci Time Projections.  Each time period measured is marked with blue lines and arrows labeled A and B.  The forecasts are marked with red lines and labeled for the Fibonacci ratio used.

Fibonacci Time Projects are easy to make using the Fibonacci Ruler tool in Ensign Windows.   To use the Fibonacci Ruler tool, click the Fibonacci Ruler button. The cursor will change to a pencil while in the draw mode. The Fibonacci Ruler indicates possible time movements from either two or three marked points on a chart. A start point and end point is necessary to draw the Fibonacci ruler on a chart. Vertical ruler lines extend from Fibonacci distances in relation to the start and point, and indicate possible turning points for the current trend or correction.

To draw the Fibonacci Ruler on a chart move the cursor on the chart to the starting point. The starting point is generally an important High or Low on the chart. Then drag the mouse from the start point to the end point. Vertical dashed lines will mark the Fibonacci Ruler lines. The lines are based on the distance between the start and end points. The Fibonacci Ruler uses .618, 1.272, 1.382, 1.5, 1.618, 2, 2.618, and 4.236 as possible ruler settings. Watch for the completion of a trend or correction at the ruler lines.  The percentages, colors and markers are configured on the tool's property form.

Adjusting the Fibonacci Ruler
 Re-selecting the lines will activate the ability to move and adjust them to a different location. Click the mouse on the bottom of the first ruler line to activate the lines. The cursor will change to a pencil and a square bullet will appear at the bottom of the first cycle line. Drag the square bullet to a new location and the ruler lines will adjust.

Properties
After drawing the Fibonacci Ruler on a chart, click the Chart Objects button, select Fibonacci Ruler, and then click Properties to view the properties window. The properties window can also be displayed by re-selecting the ruler lines and then right-clicking the mouse.

• Use 3 Points - Place a check mark in the 'Use 3 Points' check box if you want the Fibonacci Ruler lines to extend from a 3rd point. In this case, you will need to select a 3rd point when applying the tool. The Fibonacci values will be calculated from the first two points, and then extend from the 3rd point.