What is a Phi ellipse?
The Phi ellipse is an investment tool used in technical analysis and is also known as the Fibonacci ellipse. The Phi ellipse is named after the fact that the Fibonacci sequence is a natural derivative of Phi’s mathematical concept.
Phi ellipses are commonly used to detect price patterns. These patterns may help some traders analyze the market and decide when to buy or sell securities. These patterns can be used in all markets such as stocks, forex and futures.
- Phi-ellipse is a 3-point technical analysis tool based on the Fibonacci ratio that connects high and low swings to determine the direction of the trend and possible reversal points.
- This indicator is uncommon and may not be available on all chart platforms.
- The ellipse drawing tool is not the same as the phi ellipse, as it may not match the Fibonacci ratio.
What does the Phi Ellipse tell you?
Phi ellipses are used by traders to identify common market trends, as opposed to standard Fibonacci technical tools that seek to determine resistance and support levels. Once the three points are identified on the chart, you can draw a phi ellipse. The Phi Ellipse is a three-wave price point that helps explain the main trends.
To draw a phi ellipse, you first need to select three points. The first point is any point (although the price can be lower). The second point is the peak that occurs after that arbitrary point and is identified by an inversion. From the peak. The third point is another reversal that goes back in the original direction of the trend. The third and final point also confirms market trends. When an ellipse is drawn, the line that bisects the ellipse is used to show the trend.
Fibonacci trading tools are used to help investors identify price fluctuations. One of its main uses is to identify the underlying structure of price fluctuations by analyzing changes in the shape of the ellipse. Phi ellipses are usually drawn by computer programs because of their complexity.
Example of using a phi ellipse
Other Fibonacci trading tools, including Phi Ellipse or Phi Spiral, can help explain price patterns that are more difficult to see with the naked eye to guide trading decisions.
To interpret the result of the phi ellipse, the investor examines the angle of the ellipse. The movement of prices outside the phi ellipse indicates a potential trend change. Where the line bisects at the bottom / top of the Phi ellipse can be an inversion point.
Multiple phi ellipses in the same direction can often be included in a larger phi ellipse that provides trend and inversion information for the entire trend.
Phi ellipses are not as popular as other tools such as Fibonacci retracement and Fibonacci extensions, so they are not commonly available on most trading and charting platforms.
Difference between Phi ellipse and Fibonacci arc
The Fibonacci arc connects the high and low points. The arc extends from highs and lows to the right, indicating potential support (uptrend) or potential resistance (downtrend) levels that prices may reach in the future. These levels may offer trading opportunities.
Restrictions on the use of phi ellipses
Phi ellipses are not a common indicator and are difficult to find in most trading software. The ellipse drawing tools available on most graphing platforms do not always match the Fibonacci ratio.
The Phi Ellipse determines the direction of the trend based on the highs and lows of recent swings. Since these are visible to the naked eye, the indicators add little in terms of determining the direction of the current trend. Like a broken trend line, it can provide a potential reversal point, but forecasts are not always accurate. The price may deviate from the phi ellipse, but then move laterally or continue to move in the original trend direction.
This indicator is useful for identifying phi elliptical signals and analysis when used in combination with price action analysis and other technical analysis tools.