Why 61.8%? | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Why do indicators not work/work? Why is Forex not truly random? 129 replies

How to find out why the euro is strong or why the dollar is weak? 8 replies

Why do we trade?... no really, why? 51 replies

Why is Sentix Investor Confidence influentional on EURUSD! Why ??? 0 replies

Why oh Why .... 19 replies

Attachments: Why 61.8%?
Exit Attachments

Why 61.8%?

  • #1
  • First Post: Apr 29, 2010 8:14pm Apr 29, 2010 8:14pm
I've recently really taken an interest in the Fibonacci retracement tool...but something's been bugging me, and that is the 61.8% ratio. What is it about this number that makes it the most significant of all the ratios? I've heard it be called the "golden ratio", but don't understand why.

Is there a reason? Or is it just something that has been firmly ingrained into the minds of traders, that the reasons don't matter anymore.

I've been trading the EUR/USD since the start of the down trend in December and watched it pretty much blow through all the other Fib retracement levels and only at 61.8% did it find real support, (which I'm glad we've finally broken through).

I'm just perplexed at this ratio. Don't understand why it's the most important one of the bunch.

Any thoughts?
  • #2
  • Apr 29, 2010 8:20pm Apr 29, 2010 8:20pm
Its a huge slab of BS.
I mean people talk about 50% fib' retracements.
Good luck deriving 0.5 from the fib progression. LOLZ.

You may have noticed that is why 5,8,13,21,34,55 etc period moving averages are popular.
I find it funny that some people think they relate to some real underlying structure.
Thats not to say you can't use them as a tool.
  • #3
  • Apr 29, 2010 8:22pm Apr 29, 2010 8:22pm
The fibonacci retracement numbers come from a study by Leonardo (Leonard) Fibonacci. A Italian Mathematic, before starting to trade I already heared from that number as the golden number. Some say that is the proportion that Da Vinci used to paint Monalisa. Some say that is the number of the God, that rules every thing on Earth.
The story is fantastic you could search for more details over the Internet.
And that could all be true. Or just enough traders think they are. And make them come true.
  • #4
  • Apr 29, 2010 8:26pm Apr 29, 2010 8:26pm
The proportion was used in classical architecture (and modern too).
It can be found all over the place.
The weird thing is that it cannot be found in market prices.

Missing by 1,2 or half a pip doesn't count.
Again, I'm not saying retracement strategies aren't workable.
  • #5
  • Apr 29, 2010 8:28pm Apr 29, 2010 8:28pm
Quoting henfen
The fibonacci retracement numbers come from a study by Leonardo (Leonard) Fibonacci. A Italian Mathematic, before starting to trade I already heared from that number as the golden number. Some say that is the proportion that Da Vinci used to paint Monalisa. Some say that is the number of the God, that rules every thing on Earth.
The story is fantastic you could search for more details over the Internet.
And that could all be true. Or just enough traders think they are. And make them come true.
Some say its order of nature.
  • #6
  • Apr 29, 2010 8:42pm Apr 29, 2010 8:42pm
Some say love it is a river.

Still bullshit though eh.
  • #7
  • Apr 29, 2010 8:43pm Apr 29, 2010 8:43pm
Quoting fxpipper
...I'm just perplexed at this ratio. Don't understand why it's the most important one of the bunch.

Any thoughts?
There truly is no real answer out there but this is my personal belief. If you look at nature you will see this ratio repeated in the basic structure of almost all life here on our planet. Flowers, sea life, animals, even our face exhibits this ratio.

I specullate that it may be an crutial part of the genetic coding that has been passed on to all life. Where it comes from or if it a natural part of evolution is anyone's guess.

As humans we will repeat this pattern in many things as previously noted, archetecture, art, even music has this ratio...why wouldn't it also appear in a business where the very movement of the market is created and sustained by human involvement. Be it self fulfilling or not, it exists and if you can why not exploit it.
  • #8
  • Apr 29, 2010 8:44pm Apr 29, 2010 8:44pm
While I'm at it.

Inserted Video
  • #9
  • Apr 29, 2010 8:47pm Apr 29, 2010 8:47pm
I can't even begin to explain it here..some people like Ted have no idea so they slam it....anytime you have mass human nature involved the golden ratio is in play, it is ingrained in us as humans and our herding mentality...you'll never convince ted...but that is fine..his money spends just fine......I went to the web and studied everything I could find and re studied it til it made sense there were alot of "aha" moments after reading material 10 times. you can get some info on it from the book elliott wave principles by Robert Prechter and you can get some more info on it and human nature as it pretains to herding at socionomics.com If you have questions, feel free to IM me, I won't throw pearls to swine to berate what they don't understand
  • #10
  • Apr 29, 2010 8:49pm Apr 29, 2010 8:49pm
Quoting gspajon
I specullate that it may be an crutial part of the genetic coding that has been passed on to all life. Where it comes from or if it a natural part of evolution is anyone's guess.
Thats all very nice but you don't, won't and can't find these ratios in market prices. Close is not good enough when taling about mathematical structures.
  • #11
  • Apr 29, 2010 8:54pm Apr 29, 2010 8:54pm
Quoting waves
I can't even begin to explain it here..some people like Ted have no idea so they slam it....anytime you have mass human nature involved the golden ratio is in play, it is ingrained in us as humans and our herding mentality...you'll never convince ted...but that is fine..his money spends just fine......I went to the web and studied everything I could find and re studied it til it made sense there were alot of "aha" moments after reading material 10 times. you can get some info on it from the book elliott wave principles by Robert Prechter and you...
If you say so oh great one! You don't really know what you're talking about though do you?

BTW I am ready to be convinced, "I'm all ears" as they say.
Just because you use a retracement tool with these ratios does not, repeat not, mean they have any underlying value in market structure.

Try changing the values to 25, 50, 75, 125 etc. They'll work just as well.

Why on earth you're prattling about herding behavior and socioeconomics is beyond me. I never challenged any of that. Maybe you just wanted to act big and hard on the interwebs?

Which brings me on to the "people like Ted" assertion.
What kind of people are we exactly?
Ones who can read and think, I'd venture.
  • #12
  • Apr 29, 2010 9:01pm Apr 29, 2010 9:01pm
I'm on Ted's side, it's all crap.
The breaking of a wave cannot explain the whole sea.
  • #13
  • Apr 29, 2010 9:03pm Apr 29, 2010 9:03pm
I give up Ted..thanks for adding to the question of the meaning of 61.8............
  • #14
  • Edited 9:31pm Apr 29, 2010 9:04pm | Edited 9:31pm
Quoting Craig
I'm on Ted's side, it's all crap.

Thanks mate, but there is really no side to take.

Look at a price chart, retracements do not land on fib' ratios.

I said before that I think that fib retracements can be used, but that doesnt mean they are mathematically present in the market structure.

I really get pissed off when people like Waves come and deliberately misinterpret posts and cast aspesions about, "what kind of person" I am.
  • #15
  • Apr 29, 2010 9:13pm Apr 29, 2010 9:13pm
Quoting GEfx
I think you have been given the correct answers above, and if you want to know more about the golden ratio, Google it and read away. Fibo numbers and ratios are all over nature and in architecture, and I use it extensively in my trading. It works well for me (retrace to .618 and trade to .618 extension, then .786, then 1.27 etc), but I do not expect it to be accurate to the pip.
I'm not against that kind of attitude.
(Fib' fundamentalists who think the market is dictated by these magic ratios really set me off though.)

Your method places a predertimed risk:reward structure on your trades, which can't be a bad thing. There's no need to think the market cares though.
  • #16
  • Apr 29, 2010 9:19pm Apr 29, 2010 9:19pm
Ok Waves. Seeing as I've already bitten, let me quote you.

"Newsflash..........news means nothing"- You.

Can you explain the precipitous EUR/USD drop this week in terms of mathematical ratios?

No. Off course you can't.

Was it something to do with the news of Greece being downgraded by S$P?

Yes. Off course it was.

Ladies and gentlemen of the jury, I rest my case.
  • #17
  • Apr 29, 2010 9:21pm Apr 29, 2010 9:21pm
Quoting Ted1983
Some say love it is a river.

Still bullshit though eh.

you just totally aged yourself, brah. lol.

i guess i just did, too.
  • #18
  • Apr 29, 2010 9:26pm Apr 29, 2010 9:26pm
LOL. I was actual googling for the Top Gear clip.
The song lyric seemed appropriate though.
  • #19
  • Apr 29, 2010 9:35pm Apr 29, 2010 9:35pm
hi guys,

you might want to check this out :

http://www.elitetrader.com/vb/showth...hreadid=192348
  • #20
  • Apr 29, 2010 9:36pm Apr 29, 2010 9:36pm
I have no desire to win this arguement....ya, greece was on my mind when I opened 2 positions at 1.48...why did I get in there and stay? maybe the same reason I sold the pound at 1.775 with 2 add ons.....but carry on with your style I hope you trade as well as the amount of posts you have. I'm done......next topic............
0 traders viewing now