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  • #21
  • Dec 2, 2007 6:23pm Dec 2, 2007 6:23pm
I think I done it before, but for those who think fibs are self-fulfilling, I can post a chart of the Dow from the 1920's and 30's showing their effectiveness.

Were they self-fulfilling then before anyone knew to apply them to the markets?

And how about when they don't work. Well if there are followed by so many why wouldn't they work more of the time. Could it be that they work sometimes and sometimes not, just like any other freaking indicators anyone has ever come up with. Jeeze Us Christ.

There. Ok I'm done. Now where is that bottle of Tequila.
  • #22
  • Dec 2, 2007 6:31pm Dec 2, 2007 6:31pm
Firstly thanks to all for the welcoming message, good to be back as well, the health is improving slowly, hopefully I have stomped that damn cancer to back from where it came from.

I think my main point is perhaps not getting across, it's not about whether price is turning at a fib point someone has drawn on a chart (and as many have said, like trendlines, different people draw them in different places, so for one they worked, for another they didn't) ... instead it is about whether there was prior market activity to justify the turn, i.e. support/resistance being broken and returned to, areas of market dispute (congestion areas) or prior tops and bottoms being defended ... most of the time I seem to be seeing reasons in the prior market activity, if price turns consistently in "mid air" with no reason in the past to turn then my view may change ....
You can quit and they won't care, but you will always know.
  • #23
  • Dec 2, 2007 8:28pm Dec 2, 2007 8:28pm
Quoting Akuma99
Ah fibonacci retracements, there isn't a day that goes by where I don't here some analysis claiming xxx/xxx is heading north due to a fibonacci retracement here and a fibonacci retracement there, and like most I followed the masses, trod the same well worn path and threw fibonaccis around on my chart like they were going out of style.

Only thing is, to me there are much more logical explanations as to why price is turning then the mathematical phenomenon that is fibonacci in nature applied to price. I could go into a thousand words on the topic, but I'll let pictures say those words for me.

Let's look at the current pound charts for the most recent 4H upward trend (always shows the best retracements). I'm sure there are many places around the web claiming the beauty of fibonacci retracements with a chart similiar to this:

http://img512.imageshack.us/img512/5323/gbpusd1kt4.gif



.. I have a question though, firstly, why, when dealing with retracements we seem to ignore the overshoots, that first black retracement didn't retrace 38.2% at all .. it retraced somewhere around 41.9% ... where is the golden ratio in that number? ... it is the same of all subsequent retracements ... if we are going to claim proportions according to the golden ratio, we can't claim 41.9%, 69.7%, 52.1% etc. are moving to the beat of fibonacci. Am I being picky ... yep most definitely

To me pure logic seems to make more sense to me ... taking the same chart, lets look at each retracement seperately and see if there is another reason other than fibs to explain why price turned:

http://img84.imageshack.us/img84/562...collagelv0.gif




So did price move because a sunflower is in perfect proportions to the golden ratio, or the egyptians (oh how I could go back to that time) built their pyramids to it ... or because of simple supply and demand? Position protection and liquidation? .. and how do we explain all the other ratios that price shot straight through, what happened to the magic of fibs then? ... to me there is always a more logical explanation.





Nice to see you posting again Akuma99.

Thank youfor that chart above. I actually am looking at it and thinking about your explanation as part to justify price movement in relation to Elliott Waves.

And believe it or not I like this as it does explain the overshooting of price from specific Fibonacci levels.

Now I have something to add to my analysis which is looking at price history and see where these support and resistance levels occur in relation to my EW Counts and Price Projections.

Thank you again and Good Health to you man.

EG
  • #24
  • Dec 3, 2007 1:47am Dec 3, 2007 1:47am
Quoting SunTrader
I
And how about when they don't work. Well if there are followed by so many why wouldn't they work more of the time. Could it be that they work sometimes and sometimes not, just like any other freaking indicators anyone has ever come up with. Jeeze Us Christ.

There. Ok I'm done. Now where is that bottle of Tequila.
Bingo!!! Give that man a bottle with a worm in it!
  • #25
  • Dec 3, 2007 5:10am Dec 3, 2007 5:10am
Dont forget the lemon and salt ...
You can quit and they won't care, but you will always know.
  • #26
  • Dec 3, 2007 10:13am Dec 3, 2007 10:13am
Quoting MrFuture
I like Fibos. I do not thing they are useless, not at all.

Just take a look at this 1HR chart of the GBP/USD.

Obviously, as you can see, you have to use retracements, fans and curves to have a better idea.

I circled in green everytime price stopped at a FIBO level. Just a coincidence ?
Couldn't it be that if enough lines are present then price will intersect/ turn at them anyway? Putting a curve on a price graph or any graph is just a "line of best fit" or a curve fitted proxy for the general trend. Arguably this is just another trend following tool. If it works for you then that is great. This does not mean that there is any scientific/natural underpining to the theory.

I am in complete agreement with the thread starter on the application of retracement levels. To be considered a Fibonacci retracement the price must stop at the exact level. The ancient Greeks built their temples in accordance with the Golden ratio I'm pretty sure they didn't say, "Well 40% is close enough, that'll do, lets hit the taverna."
Also the proportions of the human body/ face exhibit these ratios. Think of the most beautiful person you have ever seen. The proportions of their features are in accordance with the Golden ratio. They wouldn't look quite so good if these ratios were a few percent out. In fact they would look like the elephant man/woman!
  • #27
  • Dec 3, 2007 10:28am Dec 3, 2007 10:28am
Every month a thread like this surfaces, and my reply is always the same.

My take on fibs

they worked for me as it provides a psychological confirmation of an entry signal.

for example, i combine candlestick formation and use fibonacci as further confirmation.

If fibos have not worked for you, it may be because u are using them as your primary tool. Which should not be the case
100% of traders are losers. Just that some win more than they lose!
  • #28
  • Dec 3, 2007 10:49am Dec 3, 2007 10:49am
Quoting Ted1983
To be considered a Fibonacci retracement the price must stop at the exact level.
  • #29
  • Dec 3, 2007 11:20am Dec 3, 2007 11:20am
"To be considered a Fibonacci retracement the price must stop at the exact level."


Well, good luck finding anything that stops exactly at a specific level my friend.

Obviously that's not the case, otherwise we would all be millionaires by now.

Nobody here is saying that FIBOS are the holy grail.

However, they do a pretty good job in giving you an idea of where the price might go next, and I think that the chart I posted clearly shows that.

The key is: do you know how to draw Fibo lines ? And also, were the recent moves of the pair nice and clean, trending that is, or were they all in a confusing range ? 'Cause guess what, that will also determine how easy it will be to draw new Fibo levels and therefore its effectiveness.

Fibos are not just an indicator that you pick and it automatically appears on the chart like a MA. You actually have to know how to draw it.

Like it or not, Fibos do work, not always, but most of the times they do.

Mr. Future
"Lunch ? Lunch Is For Wimps !"
  • #30
  • Dec 3, 2007 4:04pm Dec 3, 2007 4:04pm
"Well, good luck finding anything that stops exactly at a specific level my friend."

Mr F, but that being the case, would you accept that the Fib levels are fairly arbitary? In fact, forget the golden ratios, I reckon it'd be just as useful having 20,40,60,80,100% to draw on your charts.

I think they work because prices retrace full stop, and that you could have virtually any set of numbers fairly evenly spaced apart and they'll hit one of them. I don't think there's anything special about fib numbers in relation to forex...
  • #31
  • Dec 3, 2007 5:07pm Dec 3, 2007 5:07pm
Gann liked to slice moves into eights. Well 2/8 = 25% which is close to 23.6% and 3/8 = 37.5% is close to 38.2% and 4/8 = 50.0% is same for 50.0% and 5/8 = 62.5% nearby to 61.8%

The numbers themselves are not magic. It always comes down to what the market does when it get to a number. What also helps is when prior support or resistance is near a number or when there is a confluence of various levels.
  • #32
  • Dec 3, 2007 8:45pm Dec 3, 2007 8:45pm
Quoting SunTrader
Gann liked to slice moves into eights. Well 2/8 = 25% which is close to 23.6% and 3/8 = 37.5% is close to 38.2% and 4/8 = 50.0% is same for 50.0% and 5/8 = 62.5% nearby to 61.8%

The numbers themselves are not magic. It always comes down to what the market does when it get to a number. What also helps is when prior support or resistance is near a number or when there is a confluence of various levels.
Ah Gann ... how his work has taken up many of my sleeping hours ... if what happens around these levels are more important, then we are trading price action, not fib levels, fibs, gann lines, fans, arcs seem to act as psychological support along the lines of Mr demark was talking about.

I am not sure why SunTrader is laughing so hard at Ted1983's comment ... if we are basing this on mathematics, then he is right it can't be a fibonacci retracement unless it stops on the dot ... else I am going back to my high school math teacher and demanding new marks ... 2+2 did equal 5 ... its close enough.
You can quit and they won't care, but you will always know.
  • #33
  • Dec 3, 2007 8:55pm Dec 3, 2007 8:55pm
Quoting Akuma99
I am not sure why SunTrader is laughing so hard at Ted1983's comment ... if we are basing this on mathematics, then he is right it can't be a fibonacci retracement unless it stops on the dot ... else I am going back to my high school math teacher and demanding new marks ... 2+2 did equal 5 ... its close enough.
Well if you don't know................

Is this rocket science or building the pyramids. I didn't claim it was. I use fib to find zones. Anyone who claims to trade to the pip or to the second on every trade is living in a fantasy world.

I'd like to know where it is written that if an indicator (fibs or anything else) doesn't move to exact spot that it is not accurate and/or tradable.
  • #34
  • Dec 3, 2007 9:08pm Dec 3, 2007 9:08pm
Quoting cgldsmth
the fact that a large number of traders do actually believe in fibs make them a self-fulfilling prophecy. That in large part is how a lot of popular indicators work, just by massaging crowd behaviour
i agree with csmith. and because of that we can make money. don't worry if it's not some natural force of nature. bars on a chart isn't natural either.
  • #35
  • Dec 3, 2007 9:13pm Dec 3, 2007 9:13pm
Also I may be wrong but I don't believe Tom DeMark ever talks about price action by itself. He does not claim to be a tape reader watching Time & Sales or a naked chart.

Far from it, he uses his techniques with qualifiers to determine whether to take an entry or not. Pre-determined stops and exits. As I believe it should be done.

He has numerous indicators based on the fib ratio numbers, such as TD Trend Factor, TD Absolute Retracement, TD Relative Retracement, TD Pressure, TD Fib Range and even his most famous TD Sequential although it uses 9 bar (not 8) setup but 13 bar countdown and an 8th bar qualifier and comparison of setup box sizes as to whether they are greater by 1.618 than the previous box. Most net versions do not have this qualifier. I probably sound like an advertisement for his stuff. Well IMHO he is the best and he has good some really big money people listening to him so thats good enough for me. That and fibs.
  • #36
  • Dec 3, 2007 9:19pm Dec 3, 2007 9:19pm
Quoting SunTrader
Which proves my point.
  • #37
  • Dec 3, 2007 9:21pm Dec 3, 2007 9:21pm
Quoting Ted1983
Which proves my point.
What that you use sunglasses to read your charts.
  • #38
  • Dec 3, 2007 11:44pm Dec 3, 2007 11:44pm
Technical tools are simply parameters within which we define price to give us the sense that we have an edge. Personally, i use patterns based on fib ratios. You have to decide whether or not it is something you're comfortable with. There is not holy grail. The same will apply with the next tool or method you apply.

Are Fibs a self fulfilling prophecy? Who cares, as long as they are an account fulfilling method. If they are not, find a method that suits your temperament.

I've been managing a large private fx fund for over 7 years. A good trader can trade successfuly off a chart with no tools at all. Trading is about understanding price, having a sound psychological profile and understanding mass psychology while making decisions and viewing market behaviours.

Houdini
You are what you do, trade with discipline. Chris Lori, CTA
  • #39
  • Dec 6, 2007 10:27am Dec 6, 2007 10:27am
My apologies for the lousy look of my TradeStation chart. There doesn't seem to be a way to upload without losing a lot of the clarity. But on EU 240min chart even though fibs didn't get the exact pip on swing low today, I think most would be happy with the results. To save everyone the eyestrain here are the details:

1.4526 low

1.4527 161.8% extended retracement of #1-2 white
1.4532 100.0% projection ABC red
1.4542 161.8% " ABC green
1.4543 200.0% " ABC yellow

and for added confirmation TD 9 bar buy setup.

You make what you want of something. If others don't care for fibs and have something they are comfortable and successful with, use it. This is what I use. No holy grail, I gave up looking for that long ago.

PS: you can get clearer/bigger image by clicking on chart.
Attached Image (click to enlarge)
Click to Enlarge Name: EU240.jpg Size: 126 KB
  • #40
  • Dec 9, 2007 1:11am Dec 9, 2007 1:11am
I agree with the OP.

I've never bought into the self fulfilling prophecy rap not since the start, for the aforementioned reasons and for several of my own. One of my personal:

Anyone who's worked in upper math knows the way fibs are used in trading is a crude distillate of the actual ratio, which was observed to operate in three dimensions, not meant to be reinterpreted into two. Almost as bad as the misinterpretations of various religions on spirituality but I won't go any further on that.

There's just far too many styles of trading, far too many tools and if you consider that many traders aren't even using the same tools the same way from one trade to the next the variations approach close enough to infinity that one finds the integral = BS.

I think the most important aspect to trading I've been able to come away with with my puny time spent with it thus far is belief, that's right belief. And part of that belief involves the discipline to follow the belief consistently and dogmatically, coupled with the ability to change when needed after reasonable reevaluation of the belief system. All this seems to come to traders after nothing less than grinding their brains and their consciousness into the market for years.

An example:

I had the fortune once to be watching several Skype trading groups simultaneously, each led by different individuals making calls independent of and without knowledge of one another. Each was calling trades at different times throughout the day, using different methods, different fibs and each having different plausible explanations as to why the trades were being taken and when to exit; sometimes the trades even overlapped temporally but were in opposing directions, that's right, opposite directions.

Amazingly, all were trading successfully, making successful calls, making each group decent incomes.

Now, this seems intuitively nonsensical. But, the common elements between all the group leaders were:

1) Time spent in the market, i.e, a LOT.
2) A strong belief their system was correct, at least for them.
3) Discipline to follow their system without faltering regardless of how much information there was to the contrary. Exits and entrances were always the same.
4)They all added to winners, and exited losers early, but all for different reasons.
5) They all had a passion for trading.

So I guess in summary, the best one can do is to watch the skilled, learn from their mistakes, continue to make your own, and don't expect success to happen EVEN if you work your A$$ off because maybe, just maybe, trading isn't for you; and no amount of perseverance will make up for following the wrong path in life.

That last bit was my own.

Thanx.
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