Risk Probability Calculator
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February, 2004
By Sure-Fire Forex Trading

Summary

The "Risk Probability Calculator" (RPC) was designed to work hand in hand with Fibonacci retracement levels. It is therefore important that you have some understanding of how basic Fibonacci works.

First Some History:

Leonardo Fibonacci da Pisa was born around 1170 the son of a city official and merchant. He became a prominent mathematician and is credited with the discovery of what we now call the Fibonacci series.

After a trip to Egypt he published his now famous Liber Abacci (Book of Calculation) in which amongst other things he comes up with the sequence of numbers.

1,1,2,3,5,8,13,21,34,55,89>>On to infinity. If you add one of the numbers in the sequence to the number before it - you get the next number in the sequence e.g. 3+5=8 and so on.

After the first few numbers in the sequence if you measure the ratio of any number to that of the next higher number you get .618 e.g. 34 divided by 55 equals 0.618. The further along the sequence you go the closer to phi you will get.

If you measure the ratio between alternative number you get .382 e.g. 34 divided by 89 = 0.382 and that"s about as far into the explanation as I care to go in this lesson.

The most popular Fibonacci retracement ratios are .382, .500 and .618. We shall also touch on expansion ratios shortly.

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