The Fibonacci Effect

How To Trade Using Fibonacci, Elliot Wave

& Zig Zag Projections

1. Count (Elliott Waves)

2. Measure (Fibonacci)
3. Setup (Prepare to Enter)
4. Trigger (Enter)
5. Follow Through (Exit)

by: Lan H. Turner

Copyright © 2013
PitNews Press
All Rights Reserved
Table of Contents
Chapter One Introduction 1

Chapter Two Patterns 15

Chapter Three Elliot Wave 67

Chapter Four Fibonacci 91

Chapter Five Zig Zag 107

 Introduction

About the Author

Lan H. Turner:
President and CEO of Gecko Software, Inc.

For seven years, Mr. Turner was the President of

his own international computer communications
and marketing firm before selling it to dedicate
himself full time to the advancement of futures
and options software applications, training, and
new trader support.

After completing four years of education at the

University Level, he began his professional
career as a full-time Senate staff member in
Washington D.C. He then became a buyer
of computer equipment for the US Navy and
National Library of Medicine in D.C. Later, after
several years as a successful Federal Government
Contracts Consultant, he began his own import/
export computer communications firm.

With years of successfully trading stocks under his belt, he finally made the leap into trading
commodities in 1995. Due to the fact that he so enjoyed trading the commodities market, he
started his first website called ThePitMaster.com. He later went on to establish the software
engineering firm, Gecko Software, Inc.; PitNews.com; and his flagship product, Track ‘n Trade.

Mr. Turner is not a licensed commodities broker or CTA, he is just a trader who has dedicated
himself to trading and educating others of the wonders of trading the Stocks, Forex, and Futures
and Options markets.

Mr. Turner is married and has two young boys who he’s been teaching every aspect of trading;
he hopes one day that they too will love trading as much as he does. Although Mr. Turner very
much enjoys flying his airplane, he’s also an avid snowboarder, four wheeler, and motorcycle
enthusiast. Mr. Turner also enjoys working on his small Utah ranch where he raises sheep, but
his all-time favorite pastime is still staying up late and trading on Track ‘n Trade.

Be sure to visit some of Mr. Turner’s favorite websites:

- TracknTrade.com - TradeMentors.com - StockAnnual.com
- GeckoSoftware.com - Chartbook.com - TNTSeasonals.com
- PitNews.com - LanTurner.com - TheWall.PitNews.com

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Fibonacci, Elliot Wave, & Zig Zag

Trading Methodologies
Speculators have two dominating thoughts of trading methodology:
• Technical Trading and Charting
• Fundamental and Seasonal trading
Traders often exhibit religious fervor over their desired “trading methodology.”
• Technical analysts watch for recurring price patterns reflected in the
movement of charts.
• Fundamental traders study the overall economic outlook for a particular
market.

The Basics of Technical Analysis

Technical analysis is the study of price behavior.
• All known factual information regarding production and consumption are
reflected by price.
• Therefore, technical analysts believe the behavior of price yields more pertinent
information of market direction than studying the fundamental reasons behind
price movement.

Annual & Perpetual Markets

Annually produced commodities have supply available at one time, yet demand is
spread throughout the year.

Perpetually produced commodities have supply available throughout the year, yet
demand tends to peak at particular times.

Why Trade Futures?

Take a look at the two charts above. At first glance, they look very similar. After taking
a closer look, we realize that these are actually two very different markets, yet they look
almost exactly the same. What’s going on here? Let’s analyze chart number one in a little
more detail. This chart is what is known as the Q’s. As a savvy stock market guru, the
symbol you would use to “look-up” this market would be QQQQ. You hear the financial
television talking heads throw around this market symbol almost every single day. It’s as
common in their language as is football, basketball, or baseball to the average guy.

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 Introduction

What are the Q’s? Well, the Q’s are nothing more than a way of trading the NASDAQ-
100 Index. Oh great, that helps, what’s the NASDAQ-100 Index? The NASDAQ-100
Index is a collection of stocks all gathered up and added together into one chart, very
similar to a mutual fund, or in this case, a stock fund. Simply put, it is a composite
price of the largest 100 domestic and international non-financial companies listed on
The NASDAQ Stock Market. (In stock trader lingo, it’s known as an ETF, or Exchange
Traded Fund.)

Take a close look at this chart and you’ll notice that you trade this market just like you
would any other individual stock. Notice the last move. It started at 36.54 when we
received a buy signal from our Stochastics Indicator, and it ended at 39.92 when we
received our sell signal from our Stochastics Indicator. The profit from this move was
$2,620.00, and the initial investment required to obtain that size of a financial reward was
$28,281.00, or 774 shares of the Q’s. A sizable chunk of change, wouldn’t you say?

Okay, that was boring. Are you ready for some excitement? Take a look at the next chart.

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Fibonacci, Elliot Wave, & Zig Zag

What’s wrong with this picture? This is exactly the same chart right? Wrong! This is
the NASDAQ-100 Mini contract traded on the Chicago Mercantile Exchange in Chicago.
The first chart, the Q’s, is traded on the New York Stock Exchange.

Let me tell you something, these boys in Chicago know how to trade. Look at this chart:
the exact same move in the NASDAQ, as the Q’s, started when our stochastics indicator
gave us a buy signal at 1493.0, and it ended when the Stochastics Indicator gave us a sell
signal at 1624.0. The amount of profit on that trade was exactly the same as our example
above with the Q’s, but take a look at that initial investment amount! Only $3,750.00!
What’s that you say? An initial investment of only $3,750.00 on the futures market
profits the exact same amount of money as a $28,281.00 investment on the stock market?
(How long did that take? Oh, sorry, that trade took about 15 days.)

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 Introduction

Getting Started
1st - Setup
• Price pattern and/or indicator
2nd - Trigger
• Break out of pattern, and/or a buy/sell signal from indicator
3rd - Follow Through
• Risk and money management strategies

1st – Setup
Locate and Identify Price Pattern/Formations. What is a “Recurring Price Pattern?”
Analyze the chart for technical formations and patterns like the narrow sideways channel,
1-2-3 top and bottom, flag, triangle, wedge, etc.

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Fibonacci, Elliot Wave, & Zig Zag

Visit: www.PitNewsPress.com/fib-8795za to Download Disc One

Select Patterns and click on Get Started. Play Video 1: Recurring Price Patterns.
This is a fun video that demonstrates the concepts behind identifying recurring price
patterns in the financial markets. After you finish this video, we will dive into examples
of Price Patterns with chart examples and build from there. Enjoy!

What you think you see...

...is not always really there.

Simple recurring price patterns

can be your most profitable
strategy.

6
 Introduction

Impractical Tools...

...produce impractical results.

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Fibonacci, Elliot Wave, & Zig Zag

What I see...

...may not always be what I see.

Do you see the young woman or the old lady?

Chart pattern recognition...

...is an art, not a science.

8
 Introduction

What appears to be black...

...may actually be white.

What appears to be noise to you...

...may be a profit opportunity to me.

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Fibonacci, Elliot Wave, & Zig Zag

What appears to be impossible...

...is simply a matter of knowledge.

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 Introduction

Recurring price patterns...

...have a distinct set of rules to learn.

Learning to trade the markets...

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Fibonacci, Elliot Wave, & Zig Zag

...is learning to see what other’s can’t.

Head & Shoulders Formation...

Anticipate a change in market momentum on a

break above/below the Neckline.

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 Introduction

Sometimes you have to think “outside the box” to

understand what’s actually “inside the box.”

Is the red dot “inside the box” or “outside the box?”

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Fibonacci, Elliot Wave, & Zig Zag

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 Pattern Recognition

Pattern Recognition

Let’s take a closer look at recurring price patterns and how to recognize them in your
charts.

On the CDROM, take a look at the Recurring Price Patterns and watch Video 2:
Recurring Price Patterns. Follow along through this section. In the front of your
workbook you will find a Charting Techniques quick reference guide for each type of
formation.

The Basics: What is a trend?

• An up-trending, or bullish market, exhibits higher highs and higher lows.
• A down-trending, or bearish market, exhibits lower highs and lower lows.
• A sideways market, or neutral market, exhibits no definable trend.

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Fibonacci, Elliot Wave, & Zig Zag

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 Pattern Recognition

Formations: Pattern #1

Support
A horizontal line (floor) which has acted as a barrier
to lower prices. Usually defined by two or more
pirce bar lows.

Resistance
A horizontal line (ceiling) which has acted as a
barrier to higher prices. Usually defined by two or
more price bar highs.

After each formation

is explained in the
video, press pause
and try the following
exercise.
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18
Pattern Exercise 1: Find the Support and Resistance areas on this chart.
Fibonacci, Elliot Wave, & Zig Zag
 Pattern Recognition

Turn the page to see the

Support and Resistance areas.

Press play.

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20
Pattern Exercise 1: Take a look at the areas of support and resistance. Did you see all these, as well?
Fibonacci, Elliot Wave, & Zig Zag
 Pattern Recognition

Formations: Pattern #2

Inclining Trendline
A straight line usually drawn to define an uptrend
against or through price bar lows.

Declining Trendline
A straight line usually drawn to define a downtrend
against or through price bar highs.

After each formation

is explained in the
video, press pause
and try the following
exercise.

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22
Exercise 2.1: Find the Inclining and/or Declining Trendlines on this chart.
Fibonacci, Elliot Wave, & Zig Zag
 Pattern Recognition

Turn the page to see the

Inclining and/or
Declining Trendlines.

Press play.

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24
Exercise 2.1: Did you see this Inclining Ttrend?
Fibonacci, Elliot Wave, & Zig Zag
 Pattern Recognition

Exercise 2.2: Find the Inclining and/or Declining Trendlines on this chart.

After the example is explained in the video, press pause and try
the above exercises.

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26
Exercise 2.2: Did you see this Declining Trend?
Press play.
Fibonacci, Elliot Wave, & Zig Zag
 Pattern Recognition

Formations: Pattern #3

Inclining Channel

An up-trending price bar pattern in which inclining parallel

lines can be drawn through or against price bar highs and lows
respectively.

Declining Channel
A down-trending price bar pattern in which declining parallel
lines can be drawn through or against price bar highs and lows
respectively.

After the example is explained in the video, press pause and try
the following exercises.
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28
Exercise 3: Find the Support and Resistance Channel areas on this chart.
Fibonacci, Elliot Wave, & Zig Zag
 Pattern Recognition

Turn the page to see the

Support and Resistance Channels.

Press play.

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30
Exercise 3: Did you see these two inclining channels?
Fibonacci, Elliot Wave, & Zig Zag
 Pattern Recognition

Formations: Pattern #4

Narrow Sidways Channel

A formation that features both resistance and
support. Support forms the low price bar, while
resistance provides the price ceiling. Chartists
frequently buy on a break up and out of the
Channel or sell on a break down and out of the
Channel.

Non-Symmetrical Triangle
A formation in which the slopes of price highs
and lows are converging to a point so as to
outline the pattern in a non-symmetrical triangle.
To trade this formation, place a buy order on a
break up and out of the triangle or a sell order on
a break down and out of the triangle.

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Fibonacci, Elliot Wave, & Zig Zag

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 Pattern Recognition

After the example is explained in the video, press pause and try
the following exercises.
Exercise 4-1: Find the Narrow Sideways Channel on this chart.

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Fibonacci, Elliot Wave, & Zig Zag

Press play.

Did you see this one?

Watch what happens when the market

breaks out of the channel.

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Pattern Recognition

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 Fibonacci, Elliot Wave, & Zig Zag

After the example is explained in the video, press pause and try
the following exercises.
Exercise 4-2: Find the Non-Symmetrical Triangle on this chart.

36
 Pattern Recognition

Turn the page to see the

Non-Symmetrical Triangle.

Press play.

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Fibonacci, Elliot Wave, & Zig Zag

Did you see this Triangle?

Watch the market break out of

this Non-Symmetrical Triangle

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 Pattern Recognition

Formations: Pattern #5
Symmetrical Triangle
A formation in which the slopes of price
highs and lows are converging to a point so
as to outline the pattern in a symmetrical
triangle. To trade this formation place a buy
order on a break up and out of the triangle
or a sell order on a break down and out of
the triangle.

Pennants
Similar to a Symmetrical Triangle but
generally not as elongated. The slopes of
price bar highs and lows are converging
to a point so as to outline the pattern
in a symmetrical triangle. To trade this
formation, you can place orders at both the
break up and out of the pennant and break
down and out of the pennant.

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 Fibonacci, Elliot Wave, & Zig Zag

After the example is explained in the video, press pause and try
the following exercise.
Exercise 5: Find the Symmetrical Triangle or Pennant on this chart.

40
 Pattern Recognition

Turn the page to see the

Symmetrical Triangle and/or Pennant.

Press play.

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42
Exercise 5: Did you see this Symmetrical Triangle?

Symmetrical Triangle
Fibonacci, Elliot Wave, & Zig Zag
 Pattern Recognition

Formations: Pattern #6

Descending Triangle
A formation in which the slopes of price highs
and lows come together at a point outlining the
pattern of a Right Triangle. The hypotenuse in
a Descending Triangle should be sloping from
higher to lower and left to right. To trade this
formation, place a buy order on a break up and
out of the triangle or a sell order on a break
down and out of the triangle. Descending
triangles, with a prior uptrend, are anticipated
to break up and out rather than down and out.

Rising or Inclining
A formation in which the slopes of price highs
and lows come together at a point outlining the
pattern of a Right Triangle. The hypotenuse
in an Ascending Triangle should be sloping
from lower to higher and from left to right.
To trade this formation, place a buy order on
a break up and out of the triangle or a sell
order on a break down and out of the triangle.
Ascending triangles, with a prior downtrend,
are anticipated to break down and out rather
than up and out.

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Fibonacci, Elliot Wave, & Zig Zag

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 Pattern Recognition

After the example is explained in the video, press pause and try
Exercise 6: Find the Symmetrical Triangle on this chart. the following exercise.

45
46
Exercise 6: DId you see this Symmetrial Triangle?
Press play.
Fibonacci, Elliot Wave, & Zig Zag
 Pattern Recognition

Formations: Pattern #7

Ascending Triangle
This formation occurs when the slopes of price bar
highs and lows join at a point forming an inclining
wedge. The slope of both lines is up, with the lower
line being steeper than the higher one. To trade this
formation, place an order on a break up and out of
the wedge or a sell order on a break down and out the
wedge. Rising wedges, with a prior downtrend, are
anticipated to break down and out rather than up and
out.

Falling or Declining
This formation occurs when the slopes of price bar
highs and lows join at a point forming a declining
wedge. The slope of both lines is down, with the
upper line being steeper than the lower one. To trade
this formation, place an order on a break up and out
of the wedge or a sell order on a break down and out
the wedge. Falling wedges, with a prior uptrend, are
anticipated to break up and out rather than down and
out.

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Fibonacci, Elliot Wave, & Zig Zag

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 Pattern Recognition

Formations: Pattern #8

Bull Flag
A formation consisting of a small number of price
bars where the slopes of price bar highs and lows
are parallel and declining. Bull Flags are identified
by their characteristic pattern and by the context of
the prior trend. In the case of a Bull Flag, the trend
leading to the formation of the Bull Flag is up. To
trade this formation, place orders on the break up
and break down points, leaving your unfilled order
as your stop loss.

Bear Flag
A formation consisting of a small number of price
bars in which the slopes of price bar highs and
lows are parallel and inclining. Bear Flags are
identified by their characteristic pattern and by the
context of the prior trend. In the case of a Bear
Flag, the trend leading to the formation of the
Bear Flag is down. To trade this formation, place
buy and sell orders on the break up and down of
the flag, leaving the unfilled order as your stop
loss.

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Fibonacci, Elliot Wave, & Zig Zag

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 Pattern Recognition

Formations: Pattern #9

1-2-3 (A-B-C) Top

Anticipates a change in trend from up to down on a break
below the number 2 point.

1-2-3 (A-B-C) Bottom

Anticipates a change in trend from down to up on a break
above the number 2 point.

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Fibonacci, Elliot Wave, & Zig Zag

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Pattern Recognition

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Fibonacci, Elliot Wave, & Zig Zag

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 Pattern Recognition

Formations: Pattern #10

Head and Shoulders Top

Anticipates a decline on a break below the
Neckline.

Head and Shoulders Bottom

Anticipates a change in trend from up to down.

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Fibonacci, Elliot Wave, & Zig Zag

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Pattern Recognition

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 Fibonacci, Elliot Wave, & Zig Zag

After the example is explained in the video, press pause and try
the following exercise.
Pattern Exercise 10: Find the Head and Shoulders formation on this chart.

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 Pattern Recognition

Turn the page to see the

Head & Shoulders Formation.

Press play.

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Fibonacci, Elliot Wave, & Zig Zag

Press play.

Head & Shoulders Formation

See the market

break out right
at the neckline

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 Pattern Recognition

Formations: Patterns #11 & 12

Double Top
Anticipates a change in trend from up to down.

Double Bottom
Anticipates a change in trend from down to up.

Triple Top
Anticipates a change in trend from up to down.

Triple Bottom
Anticipates a change in trend from down to up.

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Fibonacci, Elliot Wave, & Zig Zag

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 Pattern Recognition

Now that you have been introduced to all the different technical analysis formations, take
a look at this chart and all the differnt patterns below:

You’ll be amazed at how these different patterns will start popping off the chart as you
look at them!

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Fibonacci, Elliot Wave, & Zig Zag

Determine the Best Method of Market Exit

Once you are in the market, it is just as important to have your method of exit setup.
Consider if you are going to follow with stop loss orders or exit when target areas of
profit have been hit. Take a look at this order and how it is set up.

Take some
of your
profits
along the
way.

Here we go -
we’re in the
market going
short!

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 Pattern Recognition

So we started out Short 3...

...and
took the
first bit
of profit
at the
78.31
level.

We have another order waiting at 76.27.

Don’t forget to protect yourself - see the two stop orders at 80.79?
Notice that they were put right behind the two points of resistence.

Change
stop
to one
order.

Just
short
one
contract
and we
have
taken
a little
profit.

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Fibonacci, Elliot Wave, & Zig Zag

Follow the market with your stop on resistance marks. When the market turns to go up,
you get out on your last stop order.

Know how the trade is going to go before you place your first order, then take profits
along the way. Be sure to always follow with stop orders.

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 Elliot Wave

Let’s add to what you’ve learned!

Fibonacci Numbers & Elliott Wave

Theory or Lore?
“There are no calculable recurring events within the financial trading markets, and
all price action is random.”
“Every moment of trading is a series of chaotic events that return incalculable
results.”

Fibonacci & Elliott Wave Theory

• This is where the Fibonacci sequence and Elliott Wave theory come into play
and help us make sense out of chaos.
Two Technical Trading Camps
- Elliot Wave Technicians
- Fibonacci “Golden Ratio” Technicians

The Power of Track ‘n Trade

• In Track ‘n Trade we have several tools based on the Fibonacci sequence,
or the Fibonacci numbers as they are generally referred to as.
• We’ve designed our tools to help you create a dynamic combination with these
two very powerful theories.

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Fibonacci, Elliott Wave, & Zig Zag

Elliott Wave Theory

• Elliott Wave Theory interprets market momentum in terms of three basic recurring
price structures:
- Pattern
- Ratio
- Time
• Market cycles are composed of two major types of Wave:
- The Impulse Wave
- The Corrective Wave
• Every wave structure can be divided into five basic waves, or movements within a
given market.
• During an uptrend, waves 1, 3, and 5 are advancing waves.
• Waves 2 and 4 are corrective waves.
• Rule of thumb:
- Wave 2 should not break below the beginning of wave 1
- Wave 4 should not retrace back any further than advancing wave number 1
• After the pinnacle, or peak, of the fifth wave, we proceed to get three additional
corrective waves: retracements A, B, and C.

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 Elliot Wave

Elliott + Fibonacci = The Key!

The reason this is important is because Elliott asserted that these counter-trend waves
will usually retrace back against the Fibonacci sequence of numbers by:
- 38.2, 50 and 61.8 percent
- And frequently by 24 and 76 percent
Elliott Wave is Fractal
• We find Elliott Waves on long-term monthly charts as well as weekly charts, daily
charts, and intraday charts.
• We also see smaller waves within larger waves on each scale.

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Fibonacci, Elliott Wave, & Zig Zag

Patterns Within The Elliott Wave

• Inclining Channel

• 123 Bottom Formations

• 123 Top Formations

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 Elliot Wave

• Triangle Formations

• Head & Shoulders Top Formation

• Andrew’s Pitchfork Formation • Speed Fan

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Fibonacci, Elliott Wave, & Zig Zag

• Gann Fan

• Fibonacci Time Zone

• Fibonacci Arc

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 Elliot Wave

• Fibonacci Predictions (A,B,C,D) • Fibonacci Projections

This section will give you practice in identifying Elliott Waves in charts. Once you
can find the Elliott Waves, you will be ready to move on to applying Fibonacci
Retracements to project and manage your trade. Then we will teach you how to use the
Zig Zag tool to confirm your Elliott Waves. Let’s get started!

Watch Video 2: “The Perfect Elliott Wave” in the Elliott Wave section. Look at the
Elliott Wave price patterns and then watch Video 3: “Identifying the Elliott Wave in a
Chart.”

During the video you will have exercises where you will identify the Elliott Wave. Be
sure to pause the video when a new chart is opened so you can practice before you get
the answer. Turn the page to start the exercises.

73
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Elliott Wave Exercise 1: Find the Elliott Wave Pattern.
Fibonacci, Elliott Wave, & Zig Zag
 Elliot Wave

Turn the page to see the

Elliott Wave Pattern.

75
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Elliott Wave Exercise 1: Did you see this one?
Fibonacci, Elliott Wave, & Zig Zag
 Elliott Wave Exercise 2: Find the Elliott Wave Pattern.

77
Elliot Wave
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Elliott Wave Exercise 2: Did you see this one?
Fibonacci, Elliott Wave, & Zig Zag
 Elliott Wave Exercise 2: How about this one? There’s actually a double wave.

79
Elliot Wave
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Elliott Wave Exercise 3: Find the Elliott Wave Pattern.
Fibonacci, Elliott Wave, & Zig Zag
 Elliot Wave

Turn the page to see the

Elliott Wave Pattern.

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82
Elliott Wave Exercise 3: Did you see this one?
Fibonacci, Elliott Wave, & Zig Zag
 Elliott Wave Exercise 4: Find the Elliott Wave Pattern.

83
Elliot Wave
84
Elliott Wave Exercise 4: Did you see this one?
Fibonacci, Elliott Wave, & Zig Zag
 Elliott Wave Exercise 5: Find the Elliott Wave Pattern.

85
Elliot Wave
86
Elliott Wave Exercise 5: Did you see this one?
Fibonacci, Elliott Wave, & Zig Zag
 Elliott Wave Exercise 6: Find the Elliott Wave Pattern.

87
Elliot Wave
88
Elliott Wave Exercise 6: This is a tricky one—it’s a Reverse Wave Pattern.
Fibonacci, Elliott Wave, & Zig Zag
 Elliott Wave Exercise 7: Find the Elliott Wave Pattern.

89
Elliot Wave
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Elliott Wave Exercise 7: Did you see this one?
Fibonacci, Elliott Wave, & Zig Zag
 Fibonacci

Now we’ll apply Fibonacci’s principles to this pattern. Take a look at the Fibonacci
Section on Disc #1 and follow along with the workbook.

Fibonacci Introduction
I want to give you a simple introduction to the basics of Fibonacci—where it came from,
where we find it in nature and science, and why it is important. I will focus on how we
translate and use the “Golden Ratio” to help us predict movement within the financial
markets.

This mathematical model is named the Fibonacci Golden Ratio because it was developed,
or discovered, you might say, by a famous medieval Italian mathematician who lived
around 1170 AD, and his name was Leonardo Fibonacci.

Fibonacci Sequence
The Fibonacci sequence is a series of numbers which are generated by a simple math
formula that has been adapted to a number of uses that have to do with putting order to
chaos. It is still found in different areas of mathematics and science today.

It looks like this: 0, 1, 1, 2, 3, 5, 8, 13, … and continues on forever.

The simple formula that creates this string of numbers looks like this: 0+0=0, 0+1=1,
0+1=1, 1+1=2, 1+2=3, 2+3=5, 3+5=8, 5+8=13, and so on. All we do is simply add the
last two numerals to get the next numeral. This is the Fibonacci sequence.

We use the Fibonacci sequence to obtain what we call the “Golden Number.” It’s the
Golden Number that we use most often in our trading endeavors. Knowing how we
obtained the “Golden Number” is only a matter of academic exercise and background
knowledge. In Track ‘n Trade, we’ve done the math for you behind the scenes and
provided you with the tools necessary to make those calculations easily. Learning how to
use those tools is the real key, and it will be discussed at a later point in this workbook.

Here’s how we obtained the all important Golden Number from which all Fibonacci
Trading and market retracements and projections are based. Mathematically speaking, we
take the ratio of two successive numbers in the Fibonacci series:

(1, 1, 2, 3, 5, 8, 13…)
1/2 = 1, 2/1=2, 3/2=1.5, 5/3=1.666…
8/5 = 1.6, 13/8=1.625, 21/13=1.61538

The division of any two adjacent numbers gives the amazing Golden Number:
- 34/55 = 0.618 or inversely 55/34 = 1.618

Therefore, if you have a segment of a line divided at .618 of the total distance of the line,
the ratio of the small segment to the larger segment is the same as the ratio of the larger
segment of the entire line. This ratio is known as the “Golden Ratio” or the “Golden
Mean.”

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Fibonacci, Elliot Wave, & Zig Zag

It’s easier to see what is happening if we plot the ratios on

a graph. Notice that the numbers start to settle in on one
particular value, 1.618. We call this value “The Golden Ratio”
or “The Golden Number.”

So, next time someone asks you what the answer is to all the
world and the universe, it’s not 76 as we’ve all been led to
believe, it’s 1.618034, or rounded down to a manageable size,
1.618. This number is often represented by the Greek symbol
of Phi.

Fibonacci Ratio
Why is this important? The argument is that everything in nature appearing to be chaos
is actually something other than chaos. It is function and form, based upon Fibonacci’s
magical golden number. This mathematical ratio is found in many places of nature.

If we take a close look at our own human body, we find that it

is also found in many proportions, such as the distance from
the ground to the navel to the top of the head of a woman. On
a man, it is the ratio of the distance from his waist to the top of
his head to the tip of his outstretched fingers. (As exampled in
the famous drawing by Leonardo de Vinci to the left.)

Golden Ratio & Nature

The Fibonacci Ratio can also be found in nature. If the ratio is turned into a spiral, it is
the mathematical ratio of the spiral of a galaxy, the curl of a wave, the curl of a ram’s
horn, or even a simple sea shell.

• Golden Ratio Spiral

• Bernoulli Spiral
• Logarithmic Spiral
• Equiangular Spiral

It has been called many things, but the important thing to remember is that whatever it’s
called, the mathematical algorithm which describes how these spirals are created comes
from this simple yet very powerful and complex math formula. On many plants, the
number of petals is a Fibonacci number: buttercups have 5 petals, lilies and iris have 3

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petals, some delphiniums have 8, corn marigolds have 13 petals, some asters have 21, and
daisies can be found with 34, 55, or even 89 petals.
• 3 petals: Lilies often have 6 petals formed from two sets of 3.
• 4 petals: Very few plants show 4 petals (or sepals) but the Fuchsia do. Four is not a
Fibonacci number!
• 5 petals: Buttercup, Wild Rose, Larkspur, Columbine (Aquilegia), and Pinks.
• 8 petals: Delphiniums
• 13 petals: Ragwort, Corn Marigold, Cineraria, and some Daisies.
• 21 petals: Aster, Black-eyed Susan, Chicory
• 34 petals: Plantain, Pyrethrum
• 55, 89 petals: Michaelmas daisies, the Asteraceae family.

Some species are very precise about the number of petals they have, like Buttercups,
but others have petals that are very near those above, with the average being a Fibonacci
number. Here are some more examples of the Fibonacci Ratio in nature:

The Fibonacci Ratio, being a part of nature, also affects things which are determined by
human action. Look at your own hand—you have: 2 hands, each of which has 5 fingers,
each of which has 3 parts separated by 2 knuckles. Is this a coincidence or not? Also,
measure the lengths of the bones in your fingers. You will find they follow the same rule.

We also find the Fibonacci Ratio in many other proportions

of the human body. On a women, it’s manifested as the
distance from the ground to the navel to the top of her head.
On a man, it is the ratio of the distance from his waist to the
top of his head to the tip of his outstretched fingers.

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Let Us Simplify The Math

Gecko Software’s Track ‘n Trade Pro Fibonacci ruler has been designed to calculate the
Elliott wave retracement levels against the Fibonacci Golden Ratio and Time sequence
within any given trend. We’ve done the math for you, so you don’t have to. In Track ‘n
Trade, we have several tools based on the Fibonacci sequence, or the Fibonacci numbers
as they are generally referred to as.

The first tool that we will cover is the Fibonacci Ruler. This tool gives you retracements,
predictions, projections, and time zones, based on these numbers and formulas that you
just learned about. You can forget about all the Math; we’ve done it for you!

Fibonacci Retracement
• Markets have a tendency to retrace 50% of the last move.
• A more accurate level of retracement can be seen by using the Fibonacci ruler
retracement levels of: 23.6%, 38.2%, 50%, 61.8%, 78.6%, 100%
• For every action, there is an opposite and equal reaction; Fibonacci ABCD pattern.

So if markets have a tendency to retrace 50% of the last move, why is it important to
establish retracement levels?

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Fibonacci Price Patterns

Watch the video “Fibonacci Patterns, Newton’s
Tool and more.” This video covers the
Fibonacci Patterns, Newton’s Tool, and how to
identify and use them in your charts.

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Fibonacci Price Patterns

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Fibonacci Price Patterns

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Fibonacci / Elliott Patterns Within Patterns

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Newton’s Law
For every action, there is an equal and opposite reaction.

Fibonacci Projections

Newton’s Prediction

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Watch Video 1: “Using the Fibonacci Ruler.” This is a tool that is based on the numbers
and formulas that you just learned about.
Newton/Fibonacci Prediction

Fibonacci Extensions - Chart 1

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Fibonacci Extensions - Chart 2

Fibonacci Time Zones

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Fibonacci Price & Time Zones

Fibonacci Extensions - Chart 1

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Fibonacci Extensions - Chart 2

Watch the training videos at the end of the Fibonacci section on Disc #1 to see the
Elliot Wave/Fibonacci combination in action. There will be 15 videos in the first section,
and then you will have a trading examples section that will put everything we have
learned so far together in trades.
Training Videos
-Using Elliott Wave and Fibonacci Together
This is a series of short clips that show you how
to set up your Fibonacci Tools and apply them to your
Elliott Wave charts.

- Trading Examples
Number 1: Elliott Wave and Fibonacci in Crude Oil
Number 2: Elliott Wave and Fibonacci in Gold
Number 3: Elliott Wave and Fibonacci in Canadian Dollar
(with CCI Indicator)
Number 4: Elliott Wave and Fibonacci in in Soybeans
(with MACD Indicator)

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Reference Indicators for Added Confirmation

Before we get into using the Zig Zag Indicator, let’s talk about indicators in general.
Using Indicators as a method of confirming your other thought processes is a prudent
way of reassuring yourself you are on the right track.

Using indicators alone as a method of market entry and exit is a sure-fire way to give up
your holdings to someone else.

Introduction to Indicators
• COT - Commitment of Traders – Plug-in • MACD - Moving Average Conv./Div
• SEAS - Seasonals Indicator – Plug-in • MOM - Momentum MOM(A) Average
• Zig Zag - Zig Zag Indicator (Fibonacci) • %R - Williams Percent R
• AD - Accumulation & Distribution • RSI - Relative Strength Index
• CCI - Commodity Channel Index • STO - Stochastics, Fast & Slow
• DMI - Directional Movement Index

Understanding The Market

Why do we have futures exchanges?
- Help producers sell their goods
- Help consumers receive access to goods
Why do we have speculators?
- Give the market liquidity
- Allows speculators to make profits on small price movements

What is the Futures Market?

Commodity Exchanges is the universal location created for the purpose of exchanging
and determining the price of goods, such as:
• Food products: Corn, Wheat, Soybeans, Cattle, and Pork
• Energy products: Crude Oil, Heating Oil, and Natural Gas
• Financials Assets: Dow Jones, S&P 500, Canadian & US Dollar, Gold, and Silver
• Non-durable items: Cocoa, Coffee, Lumber, and Sugar

Standardized Futures
• Grade - Specific quality and grade
• Delivery - Where and when
• Margin - Keeps everybody honest

Watch the “Intro to Indicators” Video in the Zig Zag section of Disc #1

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What is the COT?

• Federally Controlled Report of Trading Activity
- Provided once a week (Fridays)
• Commercial Hedgers
• Large Speculators (Banks & Hedge Funds)
• Small Speculators (You and Me)

COT Tab in Track ‘n Trade Pro

COT Settings in Track ‘n Trade Pro

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COT Indicator in Track ‘n Trade Pro

In the screenshot above you will notice that the COT Indicator has three types of bars:
• Blue - Large Professional Traders
These are the pros, the big boys, the professional money managers, and bank fund
managers. You always want to be doing what these guys are doing.

• Red - Commercial Traders

These are the farmers and factories. They already own the product, so unless you
are a farmer trying to sell your crop, don’t follow the red guys’ example.

• Green - Small Speculators

These are the tiny guys, the small speculators. Never follow their example; most
the time they are wrong and losing money. Notice in the example above, they are
all selling and going short during a huge uptrend in the market. They are doing
just the opposite of what they should be doing, and just the opposite of the big
blue guys.

JBCOT Buy/Sell Indicator

This is strictly an indicator that looks at what the largest industry players are doing and
then simply points out their actions. The JBCOT (Jake Bernstein proprietary buy/sell
indicator) does not even take the market’s price into account.

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The following screenshots are charts with trade examples using the JBCOT indicator.

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Analyze the Market for a Seasonal Bias

Using Track ‘n Trade Pro’s Seasonals Plug-in, you can determine if a market’s historical
trending pattern is in line with your current line of thought for the overall market
direction.

This gives us insight as to whether a market is performing in a “Normal” fashion or not.

Trading Methodologies
• Speculators have two dominating thoughts of trading methodology:
- Technical trading and Charting
- Fundamental and Seasonal trading

• Traders often exhibit religious fervor over their desired “trading methodology.”

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Seasonal Indicator Setting in Track ‘n Trade Pro

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Visit: www.PitNewsPress.com/fib-8795za to Download Disc Two

Zig Zag Indicator Introduction
Insert Disc #2 to follow along with the video training for this chapter. The Zig Zag is an
“overlay” indicator constructed of a series of trend lines connecting significant trend changing
tops and bottoms based on a minimum price change parameter specified by the user.

How it Works
Each Zig or Zag is confirmed only once the price of
the market moves sufficiently to form a new Zig or
Zag line, filtering out the less significant price
changes.

A Zig Zag indicator set to 10% change would

produce a line that would only reverse after a change
of 10% or greater was experienced; all movement
less than 10% would be filtered out and ignored.

Zig Zag, What’s its Weakness?

It is very important to remember that the last leg of the Zig Zag indicator continually changes
based on the price action of the underlying asset. Therefore, this indicator works its magic using
20/20 hindsight. One must be cautious and wait for the Zig Zag indicator to confirm the reversal
point without relying on its forward looking signals.

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Zig Zag, 5% Change

Zig Zag, 2% Change

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Zig Zag, .25% Change

Zig Zag, What’s it for?

The Zig Zag indicator is best used to help technical chartists analyze markets for recurring
price patterns, such as Elliott Waves, Channels, Triangles, and Wedges, as well as topping
and bottoming formations like 123 Tops and Bottoms or Head & Shoulder patterns.

Watch Video “Zig Zag with Elliott Wave”

Zig Zag, Elliott Wave Pattern

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Zig Zag, Head & Shoulders

Zig Zag Triangle Formation

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Zig Zag Strengths

One of the greatest strengths of the Zig Zag tool is its ability to calculate projection levels as well
as retracement levels, which lends itself very strongly to being used by Fibonacci experts.

Watch Video “Zig Zag and Fibonacci”

Zig Zag Projections / Retracements

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Alternate Retracements
Alternate Retracements form lines of retracement and projections on relevant high and
low points further back in the historical data set.

Zig, Zag Alternate Retracements

Zig Zag, Fibonacci Levels

Using the Zig Zag tool in combination with Fibonacci’s ABCD Projection ruler:
• Use Zig Zag to place our A point, our B point, and our C point, which gives us a D
point target area in which we can expect this market to make its projected price level.

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Price & Time Target

Zig Zag Projection Tool

Zig Zag has perfect 20/20 hindsight, but what if we could “project” off of Zig Zag’s perfect
20/20 vision forward into the future?
• Track ‘n Trade’s 123 “projection” tool was created with this purpose in mind; we call it our
“Newton Projection Tool.”

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Okay, let’s put it all together! Watch the final video entitled “Trade Example” which
combines Elliott Wave, Fibonacci, and the Zig Zag Indicator. Happy trading!

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Risk Disclosure

DISCLOSURE OF RISK:

THE RISK OF LOSS IN TRADING STOCKS, FUTURES, FOREX AND OPTIONS CAN BE SUBSTANTIAL;
THEREFORE, ONLY GENUINE RISK FUNDS SHOULD BE USED if/when participating in trading and
investing. STOCKS, FUTURES, FOREX AND OPTIONS MAY NOT BE SUITABLE INVESTMENTS FOR ALL
INDIVIDUALS, AND INDIVIDUALS SHOULD CAREFULLY CONSIDER THEIR FINANCIAL CONDITION IN
DECIDING WHETHER TO TRADE.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE
DESCRIBED BELOW.

NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO, ACHIEVE PROFITS
OR LOSSES SIMILAR TO THOSE SHOWN HISTORICALLY, IN FACT, THERE ARE FREQUENTLY SHARP
DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS
SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY
PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT
INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR
THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND
LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM, IN SPITE OF TRADING LOSSES, ARE
MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE
NUMEROUS OTHER FACTORS RELATED TO THE MARKETS, IN GENERAL, OR TO THE IMPLEMENTATION
OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE
PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY
AFFECT ACTUAL TRADING RESULTS.

As stated above: WE ARE NOT RECOMMENDING TO BUY, SELL OR INVEST IN ANY SPECIFIC STOCK,
FUTURES, FOREX OR OPTION. THIS PUBLICATION WAS DESIGNED FOR EDUCATIONAL AND RESEARCH
PURPOSES ONLY.

TESTIMONIAL DISCLAIMER:

Unique experiences and past performances are not necessarily indicative of future results! Testimonials
are non-representative of all clients. Trading Stocks, Futures, Forex, or Options involves substantial risk
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