capitalFib

CapitalFib is a term used in financial technology to describe a family of capital allocation methods that base position sizing and rebalancing decisions on the Fibonacci sequence and related ratios. The approach is typically applied in algorithmic trading and portfolio construction to impose a disciplined, rule-based structure on capital deployment while seeking to reflect non-linear risk and return dynamics.

Core mechanics involve allocating a base capital pool to assets using a Fibonacci-weighted vector derived from the sequence 1, 1, 2, 3, 5, 8, and so on. The weights are normalized to sum to one, creating a target exposure profile. Rebalancing is triggered when actual allocations diverge from targets by predefined Fibonacci-based thresholds (for example, increments aligned with 0.382 or 0.618 ratios). In practice, volatility scaling and a maximum drawdown cap are often incorporated to control risk.

Originating in fintech discussions and informal academic ideas in the 2010s, capitalFib has not become a standardized method and its adoption varies. Proponents argue that Fibonacci-based sizing provides transparent, incremental exposure and intuitive risk pacing, while critics note potential overfitting, sensitivity to parameter choices, and mixed empirical results. As with other algorithmic strategies, performance is highly dependent on market regime and implementation details.

CapitalFib is most often discussed as a heuristic for automated portfolio rebalancing and risk budgeting, not a guaranteed improvement.