# The Trading System I Use to Get Superlative Results

Jan 13, 2020

Hi, I'm Vijay Bhambwani back again on Fast Profits Daily.

Today, I want to talk to you about the Fibonacci trading system.

It's controversial. Many traders don't like it.

On the other hand, I accept it as a truism and have made tons of money with it.

Find out why I think you should use it too...

• What is Fibonacci?
• Where does it come from and how does it work?
• Why do I swear by it?
• How can you use it to boost your trading profits?

Hi, this is Vijay Bhambwani and I'm back with you today to talk about a very contentious issue for short-term day traders and swing traders. The topic is, does Fibonacci analysis work and if it does work, why it works?

In the 16th century, a town and Italy had a unique problem. Their residents loved rabbit meat. So they cultivated rabbits for food. The problem with cultivating rabbits, is that rabbits procreate or multiply at an extremely fast pace.

In those days, do remember that there were no pukka roads. So the idea of concretised or tar covered roads, did not exist. People laid out wooden planks on kuchha streets and horse drawn carriages moved on those wooden planks.

There were many instances where rabbits actually died under the hooves and wheels of those horses and horse carriages and they were infested by rats and other pests, and therefore diseases started cropping up.

The city's fathers wanted to find a solution and wanted to know when the population of rabbits would outnumber the population of humans and go beyond control. They roped in an expert mathematician, Leonardo Fibonacci, to find a solution and estimate when the rabbit's population would go out of hand.

He therefore came out with numbers which are now known as Fibonacci numbers. These are nothing but successive numbers where the succeeding number has added to its proceeding number.

For example, one and then to the third number would be in addition of one and two which would be three. The fourth number would be an addition of two and three, which would be five.

This wasn't all. Leonardo Fibonacci found that there was a mathematical correlation between the smaller number and the succeeding bigger number. The smaller number was 61.8% of the bigger number and the bigger number was 1.618 times the smaller number.

This basically started people wandering. They started seeing Fibonacci analysis everywhere in nature around them.

So if you actually see the curls of a sheep or a battering ram in its horns, you will notice Fibonacci analysis there. If you were to spread out your arms fully, and measure them from fingertip to fingertip, you will realise that your arm span would be 61.8% of your entire physical height.

If you were to see the length of your legs right up to the pelvic bone, it would be 61.8% of your entire height.

Fibonacci is seen in the constellation of the stars. Definitely, therefore Leonardo Fibonacci thought there would be a presence of Fibonacci even in the financial markets.

Now this is where the school of thought between traders is split. There are some who will go with Fibonacci analysis as a truism and formulate trading programmes around them, myself included.

And there are others who disapprove and disbelieve in Fibonacci analysis as hearsay.

But even those non-believers or disbelievers do grudgingly admit that Fibonacci analysis is more of a self-fulfilling prophecy, which means, it is working because so many people are trading by the Fibonacci analysis that they are exerting their influence on the prices.

Why reinvent the wheel when you know the wheel is round? Whether you want to be a believer in Fibonacci or a disbeliever, who grudgingly admits that Fibonacci is a self-fulfilling prophecy, I take solace from an old Arab Bedouin saying - Bedouins are those nomads who keep roaming around in the desert, pitching their tents - the saying is, 'Praise be to that which strengthens.'

Anything that makes you stronger, can't be bad.

And in financial markets, profits are what makes us stronger.

So Fibonacci analysis basically says that if the price of a security, commodity, currency, bond, or an equity, goes from point A to point B, the entire move should be construed as 100%.

And whenever it retraces or corrects, it will correct to the extent of 61.8%. Now this Fibonacci number 61.8% is also known as the golden mean or the golden ratio.

The problem starts when people start to look at this golden mean and expect the corrections to last that much. This often leads to disappointment. Let me tell you why.

The reason is, earlier, execution costs, the gyration or volatility of securities was gigantic. So the movements were so large that 61.8% was hit very often.

In this day and age of digital markets, discount brokers, and online trading, the movement of securities has really compressed, which means that you need to reinvent the Fibonacci numbers and modern mathematicians and traders have adapted this Fibonacci numbers from the golden mean to smaller numbers.

So we take 61.8% of 61.8% and come to 38.6.

We take 61.8% of 38.6 and we come to 23.7.

So on the Fibonacci ruler, if you want to day trade, you must start with 23.7.

Go to 38.6 and then 50% because halfway is half done and then 61.8%.

Once you start modifying a Fibonacci ruler to this extent, you will start to see magic unfold. So if you were to use the new age Fibonacci, you will see that it gives you superlative results. I for one, belong to that school of thought, which believes that Fibonacci trading analysis and trading systems based on Fibonacci, definitely works.

Whether you want to believe it or not, believe it is your call. Traders who trade on Fibonacci systems have an edge over the non-believers.

This is Vijay Bhambwani signing off for now but not before reminding you to join me on Tuesday, 21st of January for my free online summit the Instant Income Summit on 21st of January, Tuesday, at five PM. It's absolutely free. There are no joining charges.

And before I sign off, let me remind you to click like on this video. Do not forget to subscribe to my YouTube channel and please feel free to share this video with your family and friends.

This is Vijay Bhambwani signing off for now. Do take very good care of your investments and trades.

I hope you found this video useful. Do let me know in the comments what you think?

Also, do join me on Tuesday, 21 January, for my Instant Income Summit.

Warm regards,

Vijay L Bhambwani
Editor, Fast Profits Daily
Equitymaster Agora Research Private Limited (Research Analyst)

PS: Join me on Tuesday, 21 January, for my Instant Income Summit. I'll share my strategy (which I've kept secret until now) to make tens of thousands of rupees in income within minutes. This online summit is free to attend. Please register here. I look forward to seeing you there.

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