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Lesson 24: A REAL-TIME APPLICATION OF MULTIPLE WAVE RELATIONSHIPS
Lessons 20 through 26 list a number of ways that knowledge of the Fibonacci ratio's occurrence in 
market patterns can be used in forecasting. This lesson provides an example of how the ratio was 
applied in an actual market situation, as published in Robert Prechter's Elliott Wave Theorist. 
When approaching the discovery of mathematical relationships in the markets, the Wave Principle 
offers a mental foothold for the practical thinker. If studied carefully, it can satisfy even the most 
cynical researcher. A side element of the Wave Principle is the recognition that the Fibonacci ratio is 
one of the primary governors of price movement in the stock market averages. The reason that a 
study of the Fibonacci ratio is so compelling is that the 1.618:1 ratio is the only price relationship 
whereby the length of the shorter wave under consideration is to the length of the longer wave as the 
length of the longer wave is to the length of the entire distance traveled by both waves, thus creating 
an interlocking wholeness to the price structure. It was this property that led early mathematicians to 
dub 1.618 the "Golden Ratio." 
The Wave Principle is based on empirical evidence, which led to a working model, which subsequently 
led to a tentatively developed theory. In a nutshell, the portion of the theory that applies to anticipating 
the occurrence of Fibonacci ratios in the market can be stated this way: 
a) The Wave Principle describes the movement of markets. 
b) The numbers of waves in each degree of trend correspond to the Fibonacci sequence. 
c) The Fibonacci ratio is the governor of the Fibonacci sequence. 
d) The Fibonacci ratio has reason to be evident in the market. 
As for satisfying oneself that the Wave Principle describes the movement of markets, some effort must 
be spent attacking the charts. The purpose of this Lesson is merely to present evidence that the 
Fibonacci ratio expresses itself often enough in the averages to make it clear that it is indeed a 
governing force (not necessarily the governing force) on aggregate market prices. 
As the years have passed since the "Economic Analysis" section of Lesson 31 was written, the Wave 
Principle has dramatically proved its utility in forecasting bond prices. Interest rates, after all, are 
simply the price of an important commodity: money. As a specific example of the Fibonacci ratio's 
value, we offer the following excerpts from The Elliott Wave Theorist during a seven month period in 
1983-84.