Fibonacci Moving Average Crossover Strategy

Moving average crossover using the Fibonacci numbers

Hey there!

Among many interesting patterns found in the stock markets, a set of numbers particularly stands out - the Fibonacci series aka the ‘magic numbers’.

🪄 What is the Fibonacci series?

The Fibonacci series, developed by an Italian mathematician in the 13th century is a sequence of numbers, starting with 0 and 1, such that each number is equal to the sum of the preceding two numbers. This interesting pattern found in the number of petals of flowers and spiral galaxies in space, has found uses in trading.

So we did some work and found the following stocks taking help from the Fibonacci series. Read on to find out more about Fibonacci numbers and the strategy we used…

➡️ You must remember discussing the moving average crossovers strategy in our previous emails. To recap, a shorter-term average line crossing above a longer-term average line signals a bullish trend, and a shorter-term average line crossing below a longer-term average line signals the opposite.

➡️ Combining the above concept with the Fibonacci series, we get a Fibonacci Moving Average Crossover strategy. The Fibonacci Moving Average is an equally weighted exponential moving average using the lookbacks of selected Fibonacci numbers.

➡️ This strategy uses the intersection of four exponential moving averages (EMAs) with periods corresponding to the Fibonacci numbers (5,8,13,21) to find trading signals.

➡️ For example, if the 5-day EMA crosses above the 8-day EMA, 13-day EMA, and 21-day EMA, then it is a bullish pattern indicating a buy signal. Conversely, if the 5-day EMA crosses below the 8-day EMA, 13-day EMA, and 21-day EMA, then it is a bearish pattern indicating a sell signal.

➡️ Note that this strategy works well as a support and resistance level during a strong trend, but not when the market is going through a prolonged sideways trend.

It is recommended to use this strategy in combination with other technical analysis tools for more reliability.

📌 Learn more about trading strategies using the Fibonacci numbers and other indicators in the Basics of Technical Analysis Course by Mr. Khagesh Agarwal for just ₹349 (use NL30 for 30% off at checkout).

None of the above stock ideas are intended as recommendations. Please consult a registered advisor before buying/selling.

✍🏼 If you have any questions or just want to say hi, feel free to write to us at [email protected]

Join the conversation

or to participate.