Fibonacci numbers are the mathematical foundation for the Elliott Wave Theory (EWT). The Fibonacci number sequence is made by starting at 1 and adding the previous number to arrive at the new number (i.e., 0+1=1, 1+1=2, 2+1=3, 3+2=5, 5+3=8, …).
Each of the Elliot’ s cycles is comprised of a total wave count that falls within the Fibonacci number sequence.
Elliott Wave traders use their determination of the wave count in combination with the Fibonacci numbers to predict the time span and magnitude of future market moves, ranging from minutes and hours to years and decades.
Elliott Wave traders agree that the most recent Grand Supercycle began in 1932 and that the final fifth wave of this cycle began at the market bottom in 1982. However, there has been much disparity since 1982.
The EWT’s predictive validity depends on an accurate wave count. Nevertheless, determining where waves start and end is extremely subjective. That’s why many traders don’t believe in this technique.