Fibonacci lines - Please explain it | Forex Factory

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Fibonacci lines - Please explain it

  • #1
  • First Post: Jul 28, 2010 9:33pm Jul 28, 2010 9:33pm
Can anyone explain to me please about those lines..?

1) Based on high's and low's of the day right..? So if there's a new high or I new low I have to change those.. if you look on a 15M chart is one thing, if you go to the 4H chart you get highs and lows up to what date?

2) If it's daily.. you calculate this from where you are at midnight or it's the previous highs and lows from the previous day only?

I want to know when those lines are not valid anymore, if you date it back.. 1, 2, 3 days back?

Thanks everyone.

A
  • #2
  • Jul 28, 2010 11:37pm Jul 28, 2010 11:37pm
Quoting Arona

1) Based on high's and low's of the day right..?
Based on significant highs and lows, period. That could be on any time frame and span any time period. I think you might be mixing up Fib levels with Pivot Points and such.

Fib levels tend to have more meaning when there's confluence, ie two or more levels match up. They're subjective and not an exact science, ask any group of Elliot Wave analyst!
  • #3
  • Jul 30, 2010 5:49pm Jul 30, 2010 5:49pm
whoosh.....

Ah what's the point!
  • #4
  • Jul 31, 2010 11:10am Jul 31, 2010 11:10am
Maybe I should be explaing all of it in front of a chart, as I still don't get it.

I reckon having too many lines or highs and lows from previous days or weeks it gets a bit confusing, as things and news change on a daily basis around the world and it becomes more like a guessing game.

I am trying to learn it all by myself, as it's the only way possible in my situation and I know that one of the main things one should be looking at is what trend it is right now.

So, I try it again: If I decide to trade on the London session's opening - where I am from - Do I keep the Fib lines of highs and lows of the previous day. If there's a new high at 9am and then another one at 11am.. do I move the line from the 9am high and place on top of the 11am high or I let the whole trade run until let's say US session is over and don't move anything until the next day?

Sorry for being persistent on it, as I asked people around and no one could give me a straight answer.

A
  • #5
  • Jul 31, 2010 11:31am Jul 31, 2010 11:31am
Quoting Arona
Maybe I should be explaing all of it in front of a chart, as I still don't get it.

I reckon having too many lines or highs and lows from previous days or weeks it gets a bit confusing, as things and news change on a daily basis around the world and it becomes more like a guessing game.

I am trying to learn it all by myself, as it's the only way possible in my situation and I know that one of the main things one should be looking at is what trend it is right now.

So, I try it again: If I decide to trade on the London session's opening...
You're missing the point, fibs provide the most information when they are drawn from swing highs to swing lows, on whatever time frame you're using. Daily highs and lows are not the same thing, and since most traders know this your fibs will be different from the majority, destroying any advantage they may have provided if used correctly.

If you want to keep track of daily levels, use pivots.
  • #6
  • Jul 31, 2010 11:42am Jul 31, 2010 11:42am
Quoting Arona
.... no one could give me a straight answer.
You've already had a straight answer but you didn't understand it, ok I'll try again......

Forget about London open, US Session, and previous day's high and low. Instead think about what you're trying to calculate using Fibonacci.

You're looking for significant moves (swings) high and low to draw your lines between, the time of day or trading session is irrelevant. Fibonacci works on the premise that price doesn't move in a straight line, it retraces a percentage of major moves before continuing in the direction of the trend, it's thought of as the natural ebb and flow of the market as traders enter, exit, and add to positions, similar to the waves and tides of the sea.

In a trend, traders are looking for suitable places to enter the market in the direction of the trend and a retracement can be an ideal spot.

Why don't you post a chart of where you're drawing Fibs then we can see what you're doing, because like I said before it seems you're mixing up Fibonacci levels with Pivot points or something.
  • #7
  • Aug 1, 2010 10:30am Aug 1, 2010 10:30am
Mutt is right. You should be able to plot your fib lines on any chart at any time without knowing the current time of day or even the time frame the chart is based on. Unless you're trying to invent your own way of using Fibonacci.

Try here: http://www.babypips.com/school/fibonacci_who.html

Also, most brokers will have a tutorial illustrating the proper way of plotting fib lines. Usually you can access the brokers tutorials without having an account. Check out a few of them until one clicks. Definitely check out the babypips link first though. It will explain how to determine the swing hi/lo, which you need to do before anything else.
  • #8
  • Aug 2, 2010 8:20am Aug 2, 2010 8:20am
Thanks guys.. it's clearer now.

A
  • #9
  • Aug 3, 2010 1:45pm Aug 3, 2010 1:45pm
Hey Arona! All the above answers are correct but some traders use fibs as measuring sticks. Let's face it we can't use metres or feet. Don't be frightened of using fibs to measure any kind of retracement or projection. There's nothing wrong with using yesterday's "bar" as a reference. If you get good, you'll know when it's useful.
Gone to a better place
  • #10
  • Aug 4, 2010 5:35pm Aug 4, 2010 5:35pm
My problem now is finding the right entry... that has been 4 entries so far that I want to get in and have a long trade following the trend and my entries are just not accurate enough.. 25 pips below the lowest were not enough and all trades got stopped by 2 or 10 pips and they are all in profit now..!

Using a 15M chart I think I should move my SL even lower.. but how low is low?

Pintpoint accuracy is not working.
  • #11
  • Aug 5, 2010 1:06am Aug 5, 2010 1:06am
Quoting Arona
My problem now is finding the right entry... that has been 4 entries so far that I want to get in and have a long trade following the trend and my entries are just not accurate enough.. 25 pips below the lowest were not enough and all trades got stopped by 2 or 10 pips and they are all in profit now..!

Using a 15M chart I think I should move my SL even lower.. but how low is low?

Pintpoint accuracy is not working.
It's impossible to comment. Can't you post a chart of one of these trades, and your thinking behind it?
  • #12
  • Edited Aug 8, 2010 2:13am Aug 7, 2010 1:19pm | Edited Aug 8, 2010 2:13am
For what it's worth, here's a couple of comments on drawing Fibonacci lines.

The lines shouldn't always be drawn from a significant low to a significant high. Often it is the first higher low that is more relevant for measuring the move. Similarly it may be the first significant high rather than the highest high that is the proper level at the other side.

The general rule is that the lines should be drawn from where the move begins to where it ends. Sometimes, however, it is appropriate to use low to high such as when measuring a range rather than a move.

For illustration, I have attached a few charts below.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: euro 17 june.jpg Size: 86 KB
Click to Enlarge Name: cable 0.618 9 june.gif Size: 20 KB
  • #13
  • Aug 7, 2010 1:55pm Aug 7, 2010 1:55pm
Quoting medici

For illustration, I have attached a few charts below.

http://www.forexfactory.com/attachme...9&d=1281205096


On the first chart there were retracements before the arrow, same on the second chart, and on the third chart you've drawn it upside down, your 0% is at the bottom (unless you intended to draw an extension as opposed to a retracement?), it could be confusing for the OP. This was the 61.8% retracement, although there was a 50% before that.......

http://i36.tinypic.com/b6ue7t.jpg


There's an awful lot more to Fibonacci analysis that simply drawing highs/lows and trading retracements.


-
  • #14
  • Aug 7, 2010 2:02pm Aug 7, 2010 2:02pm
Quoting pipmutt
On the first chart there were retracements before the arrow, same on the second chart, and on the third chart you've drawn an extension as opposed to a retracement (your 0% is at the bottom), it could be confusing for the OP. This was the 61.8% retracement, although there was a 50% before that.......

http://i36.tinypic.com/b6ue7t.jpg


There's an awful lot more to Fibonacci analysis that simply drawing highs/lows/retracments.
OK...not sure I get the point of what you are saying....
  • #15
  • Aug 7, 2010 2:08pm Aug 7, 2010 2:08pm
Quoting medici
OK...not sure I get the point of what you are saying....
It's alright, you're excused, it's the weekend!

In your chart example 3 (copied below) your low point is marked 0%, high 100%, and retracement 38.2%. It's upside down, 100% needs to be at the low point (ie 100% retracement), 0% at the high point (0% retracement), and the retracement was in fact 61.8% of the upmove not 38.2%, see my chart above this post.

I'm sure you knew what you meant but the OP is new to this, it could throw him off altogether.


http://cdn.forexfactory.com/attachme...9&d=1281205096
  • #16
  • Aug 7, 2010 2:16pm Aug 7, 2010 2:16pm
Quoting pipmutt
It's alright, you're excused, it's the weekend!

In your chart example 3 (copied below) your lowest point is marked 0%, highest 100%, and retracement 38.2%. It's upside down, 100% needs to be at the lowest point (ie 100% retracement), 0% at the high point (0% retracement), and the retracement was in fact 61.8% of the upmove not 38.2%.


http://cdn.forexfactory.com/attachme...9&d=1281205096
I see. That was done on purpose to get the extension and with it the appropriate price target. So I don't think it needs to be any other way

But now I shall try to have a weekend proper... have a nice one!
  • #17
  • Aug 7, 2010 2:21pm Aug 7, 2010 2:21pm
Quoting medici
I see. That was done on purpose to get the extension and with it the appropriate price target. So I don't think it needs to be any other way

But now I shall try to have a weekend proper... have a nice one!
Right, 2 charts with retracements and a curve ball extension chart just to keep him on his toes, ok

Doesn't really explain the green arrow pointing at the 38.2% level (whatever that 38.2% is 38.2% of or represents we're not sure, looks like you meant it as an entry??) but anyway......

Yep you have a good weekend too, Monday comes around too quick!
  • #18
  • Aug 7, 2010 4:37pm Aug 7, 2010 4:37pm
I think it would all be clearer on your charts if you actually had annotated them.(text on the charts).

Mark the points A, B, C, D etc. and state which fib measurement you are taking, whether it is a retracement, extension, projection or expansion.

Also, you can get some confluence with the diffrent fib levels with obvious support & resistnace levels on the chart, adding to their usefulness.
It never gets easier, you just get better
  • #19
  • Aug 7, 2010 5:19pm Aug 7, 2010 5:19pm
Quoting pipmutt

Doesn't really explain the green arrow pointing at the 38.2% level (whatever that 38.2% is 38.2% of or represents we're not sure, looks like you meant it as an entry??) but anyway......
Is that so hard to understand?
  • #20
  • Edited Aug 8, 2010 3:20am Aug 7, 2010 5:25pm | Edited Aug 8, 2010 3:20am
Quoting Shabs19
I think it would all be clearer on your charts if you actually had annotated them.(text on the charts).

Mark the points A, B, C, D etc. and state which fib measurement you are taking, whether it is a retracement, extension, projection or expansion.

Also, you can get some confluence with the diffrent fib levels with obvious support & resistnace levels on the chart, adding to their usefulness.
Thank you for kind instruction. If you had followed or checked my contributions to this forum you would have known that I annotate my charts quite well. The point here was to illustrate how to draw fibs, and on a Saturday afternoon I was lazy enough to pull up some old charts for illustration. For that I do sincerely apologise.

And if you had seen my original post on the 9th of June set-up you would have noted that I did point out the triple confluence at that level. But that was not the point in this context.
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