Curriculum·S203 Chart Literacy and Evidence·about 29 min
Fibonacci, honestly
By the end of this lesson you can
- →State where the ratios come from and which of the common levels is not one
- →Count the choices required to place a retracement, and locate where the subjectivity sits
- →Report the state of the evidence accurately, including the fact that it is largely absent
- →Decide whether to use the tool for the only reason that survives scrutiny
Sophomore · enrolled learners
This lesson opens with The evidence base that was never built.
- What happened
- Fibonacci retracement is among the most widely used tools in technical analysis and among the least tested. A 2021 paper in Expert Systems with Applications examining automatic identification and evaluation of Fibonacci retracements across three equity markets noted that little to no rigorous research had investigated the predictive power or abnormal return-generating capacity of the indicator, and that even the most recent existing studies either proposed automated construction algorithms or reported anecdotal evidence on strategy performance with little to no statistical significance testing. The prior literature it surveyed largely demonstrated the rule descriptively rather than evaluating it.
- The decision point
- Every other technique in this course has been tested and produced a result, in one direction or the other. Support and resistance was tested and carried content. Head-and-shoulders was tested and its practitioners lost money. Moving average rules were tested, then re-tested with the search priced in, and the performance disappeared. Fibonacci has been drawn on hundreds of millions of charts and has, by the assessment of the researchers who went looking, essentially not been evaluated at all. The finding is the absence.
What you will be able to answer
- →Where do the ratios come from, and which one is not a Fibonacci ratio?
- →Where does the subjectivity in a retracement sit?
- →What is the state of the evidence?
- →What is the only reason to use it that survives?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.sciencedirect.com/science/article/abs/pii/S0957417421012495
- https://www.newyorkfed.org/research/staff_reports/sr42.html
- https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-6419.2007.00519.x
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2308659
Confidence low·Volatility low·Reviewed 2026-08-05·Owner unassigned
Contested
The characterisation of the literature as largely absent comes from the assessment of researchers publishing in this area, not from an exhaustive survey conducted for this course. Some studies exist and report positive results, generally with the methodological limitations the cited work describes. State it as the researchers' assessment.
This lesson is marked low confidence. Absence of evidence is not evidence of absence, and the honest position is that the tool is untested rather than that it has failed. Do not let a revision convert one into the other in either direction.