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Why 61.8%?

  • #121
  • May 1, 2010 6:10am May 1, 2010 6:10am
Quoting pipmutt
in fact wasn't all science and mathematics considered heresy at one time, the bible being accepted as the source of all knowledge?

Fortunately we've moved on a bit since the Dark Ages
I'm assuming enough from you that this is just a bit of playing devils advocate, but since when is drawing lines on a chart and saying, "see" everytime price hits it science?
  • #122
  • May 1, 2010 6:30am May 1, 2010 6:30am
Quoting GEfx
So why are S/R, fibs, trend lines, etc important? Because the bankers say they are. Every trader (for a CB, bank, hedge fund, etc) use these tools when they are trading. The patterns I spoke about develop when these big boys are in the market, and break down when the big boys are not very interested in the market, or change their direction.
You have a circular argument here which sounds like a conspiracy.
When a big trader looks at a S/R line, what is he actually doing? Does he expect the price to touch the line and then he and others try to reverse it? But why would other big trader bring the price lower or upper if he knows what will follow?
How do the big trader decide which S/R line is important and for what timeframe and which pair?
If the most big traders decide to buy at a certain price, which is a confluence of S/R, fibs and emas, what other big traders are going to sell to them without increasing the spread a lot which in the end will make the price unattractive?
And which bankers actually do use fibs? They usually long positions based on fundamentals and exit when these change. Anyway, a great joke is to ask Buffet or Soros if they use fibs.

I think that fibs, S/R lines and any other indicator can work only if a trader has already developed a feel for the market and from experience he knows when he must trade and when he must stay aside. Therefore it is useless to debate at which point the prices retrace, as for any imaginable percent I can find the same number of retracements and breakouts and trading all of them will be an exercise in random tranding.
  • #123
  • Edited 6:41am May 1, 2010 6:31am | Edited 6:41am
Quoting Precap2
Hi Ted, can you tell me one thing that has underlying mathematical meaning in the market? If nothing, then we don't need maths to trade, if something, then we all go back and learn trading maths and quit fighting.

Kenn
Hi,

The simple answer is no, I can't. I agree that maths isn't required to trade. Which is basically what I'm arguing.

The fib' Nazis are trying to impose a rigid, rational (mathematical) structure on a system that does not and cannot comply.
(They know not what they do. LOL)

As they are the ones making the outlandish claims, they are the ones who should supply the evidence. The burden of proof lies with the claimant.

I have stated all along that I believe one could use the fib retracement for profit in the markets. However, some of the intellectually disenfranchised memebers of this forum seem unable to grasp that.
They go on the offensive at the slightest, percieved, criticism of their indicator for resons that are beyond me.

The simple fact remains that fibonnacci ratios do not manifest themselves in market behaviour, as should be expected. If they did, the market would be 100% efficient, therefore speculative profit would be impossible.

So we should all be thankful that my position is the right one.
  • #124
  • May 1, 2010 6:42am May 1, 2010 6:42am
Quoting Sauron
You have a circular argument here which sounds like a conspiracy.
When a big trader looks at a S/R line, what is he actually doing? Does he expect the price to touch the line and then he and others try to reverse it? But why would other big trader bring the price lower or upper if he knows what will follow?
How do the big trader decide which S/R line is important and for what timeframe and which pair?
If the most big traders decide to buy at a certain price, which is a confluence of S/R, fibs and emas, what other big traders are going to sell to...
Good set of questions. In reality, most of the answers come from how the bankers manage their trading book, and where/how they place orders. Case in point: when the market makes a big move, the market will usually square up that big move (statistically at least). Why? The answer is very simple and can be found by understanding how the big boys manage their book. It may take a few hours or a few weeks, but they will square their positions. This is one example of how a S/R id created and why it becomes significant. Obviously, a FA will cause some problems here, but they will eventually square up. It is not a mystery nor is it just a bunch of random acts. You are correct, I think, about getting into the flow of the market (spoken like a true PA trader) when you are trading, which is necessary to id the start of pattern development. Good talking to you and good trading.
  • #125
  • May 1, 2010 6:46am May 1, 2010 6:46am
To help out the OP...
traders are widely targeted by snakeoil salesmen, especially forex. It is easy to create a losing indicator, cherrypick a few trades out of 1000 that actually work, and sell it. Fib. systems seem to be common among them.

With that being said, retracements are a great thing for beginning traders to find an entry. Fibs may help you if you lack screentime and cannot determine how an ideal retracement looks. If you have no entry strategy on your retracements, they may even give you an 'area' to scale-in. They do nothing more. The market (big players) does not react to the fibs. If the fibs work, it is because there is other confluence in the market.

I would think it's better for you to understand S/R in that it bends, flips, and fakes. Fibs is not s/r, but can possibly help beginner traders identify where a pivot bend will land.
  • #126
  • May 1, 2010 6:49am May 1, 2010 6:49am
Quoting Ted1983
The fib' Nazis are trying to impose a rigid, rational (mathematical) structure on a system that does not and cannot comply.
(They know not what they do. LOL)
More then 99% of all the topic starters in the "Trading Systems" section of this forum have no idea why they put an indicator on a chart and there's no wonder we see so many unprofitable systems. Everybody is trying to impose his own 6 indicators on the market and along averages and RSI, some fancy impossible to pronounce indicator must be present. So if you think that the fibs users are rigid just try to open a topic about elliott waves. 2 different guys can agree on a fib retracement, never on a wave.
  • #127
  • May 1, 2010 7:40am May 1, 2010 7:40am
Quoting randomperson
To help out the OP...
traders are widely targeted by snakeoil salesmen, especially forex. It is easy to create a losing indicator, cherrypick a few trades out of 1000 that actually work, and sell it. Fib. systems seem to be common among them.

With that being said, retracements are a great thing for beginning traders to find an entry. Fibs may help you if you lack screentime and cannot determine how an ideal retracement looks. If you have no entry strategy on your retracements, they may even give you an 'area' to scale-in. They do nothing more....
I think you made some good points. My suggestion is to find a set of tools that help you trade, that's it. Do any of them work? Well, not in the sense that they dictate to the market what it will or must do. What is important is to find a set of tools that will work for you, and that will help you make decisions. Like I said, S/R, fibs, and trend lines work for me. I trade with people who make lots of money using just S/R concepts, and several who will make more money next week using fibs only than most everyone reading this post will make all year. I think it is safe to say that all successful traders use a set of tools that help them find patterns, and then manage trading. There is not one set of magical tools that will make eveyone rich all the time.

A few of us will do the hard work and figure out what works for us. Best wishes to everyone on their journey to that end.
  • #128
  • May 1, 2010 7:41am May 1, 2010 7:41am
For those of a more inquisitive disposition than Ulterior and Waves;

http://www.lhup.edu/~dsimanek/pseudo/fibonacc.htm

http://www.umcs.maine.edu/~markov/GoldenRatio.pdf

http://www.cass.city.ac.uk/media/sto...in_the_Dow.pdf

Turns out it's even more BS than I originally thought.

edit: It seems odd that the dude going for the null hypothesis is posting some evidence.
  • #129
  • May 1, 2010 8:16am May 1, 2010 8:16am
Wow, Taking a break for a few minutes this weekend, open up the old FF and this, yank me session, is still going on. Do fibs work? Yes sometimes, sometimes they don’t, but once you understand the structure of markets - specific pricing for any instrument is tough to fill for large orders --- specially Forex. I would surmise that the overall market pattern would dictate, not the specific level, or price. But what everyone here needs to get their brains wrapped around, trading has nothing to do with being right or wrong.

Actually that mindset is counter-productive, as it leads the individual into justifying actions, reverting to emotions rather that objectivity in their trading. A trading sin that is easy to fall into.

Last week I noticed Oil was short every time my dog slept down stairs, how that dog knew that is beyond me. Trading is about making money, consistently. If you can do it with fibs, then it works for you, if it doesn’t then it don’t as the tool needs to match the trader. But regardless yes or no, trying to justify yourself on a weekend rant forum, does absolutely nada for your account’s bottom line.

Great weekend all.
  • #130
  • May 1, 2010 8:22am May 1, 2010 8:22am
Quoting auxesis
Wow, Taking a break for a few minutes this weekend, open up the old FF and this, yank me session, is still going on. Do fibs work? Yes sometimes, sometimes they don’t, but once you understand the structure of markets - specific pricing for any instrument is tough to fill for large orders --- specially Forex. I would surmise that the overall market pattern would dictate, not the specific level, or price. But what everyone here needs to get their brains wrapped around, trading has nothing to do with being right or wrong.

Actually that mindset is...
Hi auxesis. Glad to see you adding your calm perspective to this thread. I am headed back to the other thread now, leaving this group for greener pastures. This place is too full of "I can't make it work so it can't work for you" people -- sad. Please do me a favor and post on the other thread where your dog is sleeping on Monday morning, OK?
  • #131
  • May 1, 2010 8:35am May 1, 2010 8:35am
Quoting GEfx
his place is too full of "I can't make it work so it can't work for you" people -- sad.
Thats not the point. The point is whats true of the underlying nature of the market. No one (for the umpteensquillionth time) has said you cant use fibs profitably as an objective measure of range.
  • #132
  • May 1, 2010 1:19pm May 1, 2010 1:19pm
Quoting aediaz1
Seems like someone got a fully understanding of the underlying market-structure
yeah... that's what I'm after.

here's all you need to know.

the banks are the biggest volume traders here.

they run this show.

trade like them and you win.

by the way... the fuking structure ain't so difficult to get.

it's all right here.

http://en.wikipedia.org/wiki/Foreign...e_market#Banks

m
  • #133
  • May 1, 2010 2:20pm May 1, 2010 2:20pm
Quoting TJPLD
Well let him be as angry as he wants but he still is telling the truth.

I'm glad that there are quite alot of people who don't buy everything they read on the internet and think for themself. When I found out that there are no magical numbers in the chart I was afraid that I might be the only one who knows the truth. Good to see that there are still some openminded people left on the planet.
X2 bro. Magical numbers = BS
  • #134
  • May 1, 2010 3:25pm May 1, 2010 3:25pm
Looks like this same topic has been debated at least once before.
  • #135
  • May 1, 2010 11:17pm May 1, 2010 11:17pm
fibs are the new jesus.

therefore, no point trying.
Congratulations ScalaFX for coming out of the closet!
  • #136
  • May 1, 2010 11:35pm May 1, 2010 11:35pm
Have you guys who are wondering about fibs been following these guys?

http://www.forexfactory.com/showthread.php?t=233392

They are practicing Skunny's not so secret anymore methods. It gives new insights into how a fib can be used. There are many variations of the same concept they are going on. It's all about conforming not just the 0/100 levels to a swing, but getting the inner levels to conform.
  • #137
  • Edited 11:54pm May 1, 2010 11:42pm | Edited 11:54pm
Pay particular attention to thomknight. I'm pretty sure he is Skunny. Not that he is God or anything like that, but he is the expert on alternative fib methods.
  • #138
  • May 2, 2010 12:20am May 2, 2010 12:20am
Quoting Scotty B

There are many variations of the same concept they are going on.
Talking about Fibs in general I've found confluence levels to be the most significant, especially across different time frames. Whether they're a self-fulfilling prophecy or the forces of nature is debatable but it's hard to sensibly argue that they're not an effective trading tool to add to the box.

The sheer volume of analysts (both technical and fundamental, retail and institutional, in all markets) who take note of these levels makes them important to plot, ignoring them or dismissing them is a mistake in my opinion.
  • #139
  • May 2, 2010 2:34am May 2, 2010 2:34am
oh shit this thread what an eye opener!!! now STATS don't back up that psych levels work to the pip i can conclusively say the following:

MARKET DOES NOT I REPEAT DOES NOT HAVE ANY RESPECT FOR .00 OR .50 PRICE LEVELS!

THEY ARE MERELY AS RANDOM AS ANY OTHER NUMBER BECAUSE I SAID SO!!!!!

NOW I WILL ENDULGE IN PERSONAL ATTACKS TO BACK UP MY OPINION rofl
  • #140
  • May 2, 2010 3:23am May 2, 2010 3:23am
Quoting Ted1983

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.

Well Ted, I must say when I was first introduced I thought much the same as you do.

Even now, although I use them with success everyday, I don't believe the magic math theory, rather I think if everyone believes that is where it will stop, then it is bound to do so. Simply because people take profits based on those figures and insert pending orders around those particular figures.

As for the other values that you present as a substitute.. the reality is, they do not work as well. This is very easy to see simply by applying the tool to your chart at random.

If you can't see the difference when you check it out, then possibly you are looking at a small time-frame where values are so close together the difference in price is negligible.

Just my thoughts.
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