Which Fibo level do YOU use and why?

Dude, you push pivots so much, but you don't even know the formula to them.

It's no wonder why I have him on ignore.

In answer to your questions,
Pretty much yes. Again this was in response to another person stating there seemed no significant difference between some other number and a Fibonacci calculation. While price will very rarely turn exactly (to the pip) at a Fibonacci level, it will usually turn somewhere in that vicinity after striking a given level. The question remains WHICH level. And that is the variable I'm trying to pin down.

I tested the currencies that I trade regularly. (USD, EUR, GBP, JPY, AUD) and their various combinations and iterations. I trade the cash exchange and do not have a futures account. However, my belief is that it really doesn't matter. I've seen the same patterns persist in pretty much every market. Commodities, Stocks, Interest rates, etc. I haven't done the numbers on these because I do not trade them regularly.

I have not attempted to coordinate these levels with pivot points as of yet, but I will study that and see if there is something of statistical value. Support/Resistance is too subjective. Each person draws these levels as he/she sees them. Some draw to the high or low, others to the close. It is the same with trend lines, and what constitutes a "swing point". I am looking for something a little more concrete, that will lend itself to a more rigorous statistical analysis.

i like that no more than 50% discount
if more than 50% discount ,the product usually has expired or slightly damaged,ha,ha,
although it has been to get 50% discount
sometimes not able to retrieve it intact in HH or LL

HUH???!!!

Hello again gspajon. As you've mentioned anything and everything may be contaminated with subjectivity. Results are only as good as the methodology (and sample size used). What criteria did you use to determine the swing points, which would produce retracements worthy of being measured during research?

Have a nice weekend. Thanks.

Excellent question. I have found that the most accurate swing points are those that meet the following criteria:
Swing high: the highest high of 7 bars with 3 lower highs before and after the swing point.
Swing low: the lowest low of 7 bars with 3 higher lows before and after the swing point.

It's like a fractal point but with a 3 bar criteria as opposed to a 2 bar Criteria. I've found that these points represent more accurate turning points and filter out noise and insignificant pull backs.

Thanks for your reply. Those are very objective criteria. The methodology seems sound. Could you please post a chart illustrating anyway?

Here's a chart illustrating what I meant earlier. I didn't use any method to determine the swing points but they are pretty obvious on this example. As you can see both weekly open and previous weekly low fall between 61.8 to 76.4% retrace possibly increasing the odds of reversal in this area.

50 / 55.9 / 61.8

Great thread and topic of dicussion.

I have been interested in the application of Fibonacci ratios to price action for a while and can say with confidence that price does respect Fibonacci ratios in relation to prior action and that charts at all timeframes display the same characteristics of reacting to Fib ratios in a principled way.

In seeking the origins of the application of Fibonacci ratios to price I came across the work of R.N. Elliott who was the first analyst to document the phenomenon in 1938. Building on his work was Robert Prechter who wrote a great summary of the Elliott Wave Principle.

In a previous post (April 2013) on another Fib-related thread I posted the following analysis which illustrates the common Fib ratios in wave action clearly:

1) wave 2 retraces a little more than 61.8% of wave 1
2) wave 4 retraces exactly 38.2% of wave 3
3) not shown on the chart: the end of wave 4 divides the entire 5 wave sequence into 2 sections of 38.2% and 61.8%

The above applies specifically to the late April charts for Cable but is also a general rule for Fib ratios in impulse waves. As I mentioned at the time, the textbook wave pattern does not mean that Cable would continue making impulses to the downside - it could simply be the 1st wave of a zigzag correction (5-3-5) which has, again, its own Fib ratio characteristics.

http://ubuntuone.com/6bEwYtha6ZyBwmIVZ1qHcF

a FF member called Cableguy frequently publishes excellent analysis based on Fib ratio analysis on his "Five waves don't lie..." thread.

Venzen...I have taken great pains to avoid Elliot Wave counts. From my perspective (and this is just me), I find it too confusing and too complicated to keep a running wave count (assuming I was able to start at the right place). I have proven to myself that it just doesn't have to be that complicated. My current method is what I refer to as "stupid simple" and I am inclined to keep it that way. Again, to repeat all an looking for a a trend, as evidenced by swing highs and lows, and a retracement as defined by some fibonacci level. I only want to specifically target the most probable level (given the current market conditions at the time). Counting or "analyzing" whether the current move is wave (b) of an ABC correction inside a larger impulse 3, which is part of an even larger wave 1 impulse...is just too much trouble for what its worth. REALLY!! This isn't rocket science and you can make it as complicated or simple as you chose...the point is putting the odds on your side.

I want to avoid getting caught up in definitions and "analysis" or methods or systems. I simply want to do some simple probability studies for what actually occurs, not what could or should occur. If you can tell me that wave 1 of an impulse move retraces to 61,8% fib level more than 70% of the time, then I might look at wave 1 studies, but I doubt anyone has done such a study, at least I've never heard of one. I am personally not inclined to resume a study of elliot wave theory just to test that hypothesis.

However, I have heard of and have done myself studies on fibonacci retracements (regardless of what wave) that conclude that if the structure fails, the market is in a transition from trend to range or from trend to reversal.

K.I.S.S. is my motto. So enough of my rant on Elliot waves. Bottom line...price tends to trend, and in doing so it will retrace and then move back in the direction of the trend. Price will continue this until something in the market changes the way traders "see" the market then price will stop trending and the fibonacci structure will fail. That's one loss in seven. I can live with that.

I am attaching a screen shot of my charts...note the simplicity. I have placed up arrows on all the swing lows, and down arrows on all the swing highs. You will find they all meet the criteria. I have also drawn a fibonacci retracement sequence on the last swing high --> swing low.

Again, this isn't rocket science. Note that currently there are lower highs and lower lows...how long will this last? I have no idea, and anyone who claims to "know" differently is either a liar or a fool. (if we wants money to show you how he's a liar, and if he just wants to show you with out charging he's a fool).

I will continue to sell rallies until there price stops making lower highs and lower lows. Then I will look for a range or a bullish trend. DONE!

The current screen shot shows that (this time) the retrace had some confluence with the moving average at the 50% level, but note that there was no such confluence in the previous two retraces. Generally speaking when price starts to interact with the MA there may be a change coming, but again...no one knows for sure or even a probability greater than chance. As well one could make the argument that THIS retrace had confluence with a support level (now acting as resistance) at the 38.2% level. Where it held the last retrace, this time it didn't...again just chance.

I'm pretty certain there is something out there that can help me more effectively target WHICH level is "probably" going to be the best one...I just have to find it and test it.

Thanks for the chart

I love Fibs. I use advanced Fibonacci studies as the main focal point in all of my analysis, along with advanced Elliott Wave. Harmonic patterns, vibratory patterns, candlestick pattern analysis, moving average studies, advanced trendline techniques, currency correlation & strength, advanced momentum studies, market structure, timing an other methods add to the accuracy of the Fib and Elliott Wave analysis. I use over 25 fib tools, and measure multiple swings to get high probability trade set ups.

To demonstrate the accuracy and success I regularly achieve with the methods I use, I have attached my June 2013 trade results to the end of this response for your review. Most of my trades are pending orders and are filled while I am asleep or away from my computer.

I already read here on your thread you prefer to avoid Elliott Wave. I hear that a lot and submit that there are easy ways to interpret and learn EW.

Fibs have an uncanny ability to describe the growth and retraction rates of multiple aspects of life - including the markets, in my opinion. Elliott identifies multiple patterns that are repetitive in the markets and uses fibs to project both time and price reversal points.

If your interested in fibs but not in Elliott Wave, no worries, there are plenty of successful trading methods and strategies.

My suggestion would be to look at Harmonic Patterns... All 9 patterns that I study and trade use fib ratios for all legs of each pattern.

GOOD LUCK IN YOUR TRADING.

gspajon,

I have read through your good explanation of where you stand in relation to EW and how you would like to have a simple Fib retracement strategy. I have a questioning response to your explanation - please take it in the spirit of cooperation that I intend:

Firstly, I agree with you that the Elliott Wave Principle is complicated in it's entirety and it takes some time to internalise the rules and guidelines and to match them to practical application. It can be argued that it resembles the proverbial "rocket science" yet, as seasoned EW practicioners will maintain, it is truly the key to understanding market behaviour. In fact, as you progress with practicing and learning EW comprehension accellerates and soon you find yourself in great sympathy with the markets you regularly analyse - anticipating their price action and reaction levels with ease. This is not to say you are in "total sympathy" - the markets will always throw us curveballs and seem irrational at times - but the state of comprehension (in EW terms) eventually becomes so simple that all of the jargon and analytical concepts we associate with trading become almost irrellevant: head-and-shoulders, cup-&-handle, candle patterns, double top, etc, etc. The complexity of multiple, semmingly unrelated TA concepts give way to a unified EW understanding of where a particular market is in it's trend cycle and what (limited) options it has in order to complete its journey.

You end up with wave counts that are both verified and determined by Fibonacci levels and pivot points. That to me seems a much simpler set of tools than the array of concepts and terms being bandied around daily in analysts' efforts to describe and predict price action.

Fibonacci levels are so pervasive in price action (and at every timeframe) that it is possible to take a ratio such as .618 and pull your Fib tool between two arbitrary highs and lows on a chart and find a strong correllation with that ratio (or any other Fib ratio) all over the chart. e.g. between the high and low, .618 of the difference between high & low extended above or below either, .618 of the difference projected into the future from a high or low, etc, etc. The exercise is without end because the internal Fib ratios (between a randomly chosen high and low for instance) is merely a fractal component of the market's Fib DNA.

This is my critical point: in order to have reliable, repeatable results (ie. adhering to some principle) with Fib ratios you need to know where you are in a particular market's cycle of growth or decline. You can then know whether your target is most likely to be .382 or .618 or 1.618 or whatever and assess your risk based on known knowns. The alternative is to pick .236, .382, .5, .618 or .786 to establish a position and to hope this is the stage of wave development when this ratio is likely to be in force. I liken this to farming with disregard to the seasons. You can sow seeds at .618 of the elapsed day or when the moon is .382 through its cycle but it is logically not rational.

Just to be clear: Elliott Wave Principle is not a system devised by someone. It is a means of determining the stage of development of a market's price action. The basis of EW is that Fibonacci ratios undelie all price action and the bull and bear trends we witness. This was first "discovered" and documented in 1938. The analyst (Elliott) who found the correlation admitted (back then) that it is a variable and complex relationship. I do not see how it could have become simpler since 1938 since neither markets nor Fib correlations have simplified

Either I accept a principle or not. If I accept it do I question it? Maybe. But does it make sense to take some parts (Fib ratios) and discard the parts I don't like (wave counts) when the principle is based on the symbiosis of its parts? If I want to be profitable in farming I have to calculate my yield per hectare and soil fertility requirements per camp as well as endure the temporal aspect imposed by seasons. Although I may enjoy the sowing and reaping parts most - out of context those activities alone do not yield crops

As a great trader once said: "It's not a job if you enjoy it"

Chapter 1 of the book "Elliott Wave Principle" contains details of the characteristics of the different waves. The information in the book is based on wave studies of hundreds of thousands of instrument charts, so the principles are formulations of the findings of those studies. Wave 2 normallyretraces 61.8 % of wave 1. I see this daily and probably as clearly as when it was first written down 80 years ago. This event of wave 2 forming a three wave structure which terminates at 61.8% of wave 1 is a classic high probability entry signal since your risk is defined by the 38.2% gap to the origin of wave 1 - should price exceed the beginning of the supposed "wave 1" then postulation that this is wave 1 and wave 2 is invalidated by the principle. So size and risk accordingly. You just have to decide whether you want to trade this at the 1min timeframe or the 1month TF.

The other significant guideline is that wave 4 normally retraces 38.2% of wave 3. This fact allows some other trading opportunities, but none as spectacular as the impulsive blast of wave 3 from its trend catapult at 68.1% of wave 1!

daenoracer,

You acknowledge @gspajon has expressed interested in applying Fibs without EW and you say "there are plenty of successful trading methods and strategies" but, to be honest, I am not aware of any that are as tradeable as when you have a wave count defining your likely Fib level.

Whilst I want to avoid sounding fundamentalist about EW, it has to be acknowledged that the notion of using Fibonacci ratios in price analysis comes from the EW principle. Using Fib ratios outside of the context of EW and the broader framework of analysis it provides is like taking the notes from jazz out of the context of the underlying rhythmic structure: ouch!

Venzen...I take no offense whatsoever at your comments. I appreciate that you are lending your comments to help me at my request and I indeed thank you for your willingness to provide ideas. To your credit I will again revisit the idea of Elliot Wave Theory to see if I can find something of value.

I would like to suggest to you that there is an easier and far simpler way to trade using Fibonacci levels as a tool. I simply look for a trend: Bullish = higher highs and higher lows (as defined by swing points); Bearish = lower highs and lower lows. THAT IT. If I don't see that I don't trade that instrument. I just can't bring myself to care what wave or "cycle" the market may or may NOT be in. Trying to "fit" the market into predictable and repeatable cycles is truly absurd. WHY?

Because the "market" is just a machine that processes orders. All you see on your chart is the result of buy and sell orders processed in pretty much the order they are received. Crowd mentality does play a role, but trying to say that the patterns presented in the markets are repeatable and/or predictable is kind of like saying that a stampede of buffalo will stop once it the creatures see they are heading for a cliff.

Again, I strongly believe (and my account balance reflects this), that you can successfully trade the market with ANY method. If you like the complexity of Elliot Waves...that's OK. I don't. After 10 years of doing this I have found that simplicity is truly the most beneficial for me. A look at the chart I posted above shows, that I am only looking for a trend, and must wait until AFTER it forms. I don't try to call the top or the bottom, because I have no idea where that might be. I continue to trade in the direction of the current trend until my simple (and effective) trend criteria tell me the trend is transitioning.

Then I WAIT...to see what will happen. The ONLY thing the Fibonacci lines tell me are POTENTIAL areas where price will rejoin my trend. Each one of those lines has a certain probability of reversal, that get stronger the deeper it goes. I trade using this probability. Does the POSSIBILITY exist of failure? Of course, as with all methods. But the PROBABILITY of failure is relatively low. All I need to be successful is to control MY participation using these probabilities. I couldn't care less what cycle the market is in or whether we are expecting an ABC correction, or if the current wave will end on the 1.618 extension...

Again my quest is to see whether or not I can target a particular level during a retrace that has a higher probability (given the current market) of strike/reverse, than the probabilities I have already studied. I'm beginning to think that this is not the case. However, as I promised to look into pivot points I will also look into Elliot Waves to see what comes up. So far my study of pivot points in confluence with Fibonacci levels has produced nothing greater than just a casual correlation and certainly nothing that can be counted as higher than chance.

I would encourage you and anyone using Elliot Wave study to read this link here: http://www.investopedia.com/university/advancedwave/

This is a succinct yet comprehensive description of Elliot Wave theory accompanied with an actual study of the probabilities of that method. It is neither pro nor con with regard to the method it is simply a description an study...

venzen... many thanks for your quote. I agree. Elliott and Fibs go together like peanut butter & jelly. It is my opinion that fibs work best with Elliott Wave.

I also know that discernible Elliott Wave patterns are only present 50 or 60 percent of the time. Fibs can be used extremely effectively without Elliott Wave.
Harmonic Patterns would be a great place to start.

Like I said to the thread Author, Elliott Wave does not have to be complicated. There are easy ways to interpret, understand and identify Elliott Wave.

So venzen, I am with you on EW - nothing is better than EW & Fibs, however, because fib ratios explain the growth and contraction rate for so many things in life, including markets, I submit that there are many extremely effective ways to trade fibs without Elliott. I trade fibs without EW as often as I trade fibs with EW.
BEST REGARDS.

OK...I've done some studying and review, and arrived at some conclusions (at least for me). Pivot points offer no real help in so far as my original premise, trying to find a more definitive target along the fibonacci retracement sequence. So while pivots in and of themselves are useful if you wish to use them for trading, they do not assist in my objective any more than using moving averages or support/resistance as confluent areas...they will eventually lead to the same question..."which one do I use?". The actual pivot, the resistance or support lines, etc.

Elliot Waves: I have revisited this and have found that I am inadvertently trading waves 2-3; 4-5; and B-C in each cycle. This is all done without keeping a going wave count and involving myself in all the hair pulling and gnashing of teeth. NONE of what I've read so far helps me target a particular fibonacci level even if I did keep a current wave count going. If I am wrong of if you can direct me to an actual study that states something like wave 2 retraces to 61.8 fibo level x% of the time, and to the 78.6 level x% of the time...etc I would be very interesting in reading that. What I've heard and read so far is anecdotal at best. No I didn't read the original book nor do I intend to.

What I have come up however is this: I am running a fibonacci calculation (ie the lines) on each of the last two "legs" (or if you EW traders prefer, "waves 1 & 3"). I find that price stops and reverses when there is confluence between a fibo level from the previous leg and a fibo level on the current retrace. I will do a study on this. From my preliminary checks, (which are extremely cursory), I am finding that this seems to be more than just happenstance. I think I may have found what I'm looking for, but will have to run some tests to see.

What indicator is better to use with fibo ? i like stochastic, timeframe 1hr?