A computational exploration of the efficacy of Fibonacci sequences in technical analysis and trading

Among the vast assemblage of technical analysis tools, the ones based on Fibonacci recurrences in asset prices are relatively more scientific. In this paper, we review some of the popular technical analysis methodologies based on Fibonacci sequences and also advance a theoretical rationale as to why security prices may be seen to follow such sequences. We also analyse market data for an indicative empirical validation of the efficacy or otherwise of such sequences in predicting critical security price retracements that may be useful in constructing automated trading systems.