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Fibonacci lines - Please explain it

  • #21
  • Aug 7, 2010 5:54pm Aug 7, 2010 5:54pm
Quoting medici

Is that so hard to understand?
Well it could certainly be confusing to someone unfamiliar with Fibonacci levels, someone like the OP who you were trying to explain it to. In a general chat context, with others familiar with Fibs, it wouldn't be so much of an issue, but this is the Rookie Section and specifically a thread entitled "Fibonacci lines - Please explain it".

I don't wish to belabour the point because I thought we were done with it but seeing as you mentioned it......what does the 38.2% on your chart 3 refer to, 38.2% of what? And the arrow, is that continuing the theme of the first two charts you posted and pointing to an entry?

I see you're using MT4, it might help clarity if you added some additional levels in the 'Fibo Levels' as per the chart I posted. That way you would have all the levels complete with extensions market out correctly, then it wouldn't be confusing to anyone looking at it. Just a suggestion......

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  • #22
  • Aug 7, 2010 6:14pm Aug 7, 2010 6:14pm
Quoting pipmutt
Well it could certainly be confusing to someone unfamiliar with Fibonacci levels, someone like the OP who you were trying to explain it to. In a general chat context, with others familiar with Fibs, it wouldn't be so much of an issue, but this is the Rookie Section and specifically a thread entitled "Fibonacci lines - Please explain it".

I don't wish to belabour the point because I thought we were done with it but seeing as you mentioned it......what does the 38.2% on your chart 3 refer to, 38.2% of what? And the arrow, is that continuing...
The only reason I made a post to this thread, which I now regret, was that somebody stated that fibs are drawn "based on significant highs and lows, period" - a statement that could be interpreted as "between highs and lows" - and I wanted to clarify that. Did someone somehow take that personally and is now as a consequence trying to teach grandma to suck eggs?
  • #23
  • Aug 7, 2010 6:28pm Aug 7, 2010 6:28pm
Quoting medici
The only reason I made a post to this thread, which I now regret, was that somebody stated that fibs are drawn "based on significant highs and lows, period" - a statement that could be interpreted as "between highs and lows" - and I wanted to clarify that. Did someone somehow take that personally and is now as a consequence trying to teach grandma to suck eggs?
Doesn't answer the question though does it, grandma.

If it was a mistake then why not just say so, it's really no big deal, I made light of it because I was under the impression you knew what you meant, now I'm not so sure.

It wasn't my intention to find fault with your chart, all I was trying to do was avoid confusing an already confused Fib rookie with obvious inaccuracies.
  • #24
  • Aug 7, 2010 6:42pm Aug 7, 2010 6:42pm
Quoting pipmutt
Doesn't answer the question though does it, grandma.

If it was a mistake then why not just say so, it's really no big deal, I made light of it because I was under the impression you knew what you meant, now I'm not so sure.

It wasn't my intention to find fault with your chart, all I was trying to do was avoid confusing an already confused Fib rookie with obvious inaccuracies.
Oh dear, this is getting farcical. First you ask questions about obvious things, and when I respond based on that assumption, you get personal and question my understanding of things... you are certainly giving an affirmative answer to my question in the previous post.
  • #25
  • Aug 7, 2010 6:59pm Aug 7, 2010 6:59pm
Quoting medici
Oh dear, this is getting farcical. First you ask questions about obvious things, and when I respond based on that assumption, you get personal and question my understanding of things... you are certainly giving an affirmative answer to my question in the previous post.
You're right, it's farcical, and tedious!

This is pretty simple. You posted a chart with Fibonacci levels drawn upside down, a 38.2% level market out, and an arrow. I quite politely asked their significance. You asked if it was so hard to understand but didn't explain. You still refuse to explain.

Those are the facts m'lud and I rest my case, let the jury decide!

Now go and enjoy the rest of your weekend like you were going to do a dozen posts ago, and I'll do likewise!
  • #26
  • Aug 7, 2010 7:21pm Aug 7, 2010 7:21pm
Quoting medici
Is that so hard to understand?
For a newbie it might be and that is the point pipmutt was making.
  • #27
  • Aug 7, 2010 9:40pm Aug 7, 2010 9:40pm
Quoting SunTrader
For a newbie it might be and that is the point pipmutt was making.

Well said Sun.. I am still trying to come to terms with it and get some sort of sense, it's getting better the more I look at it.

Still on the subject... this thing of getting stopped out due 2 or 4 pips on my entry when trying to go for a long trade - 1 week - is driving me insane.. on spent the entire Friday swearing and talking to myself like a mad man everytime I remembered of it... tried 30pips and then 39 pips SL and didn't work.. maybe I am being too impatience on my entries and not waiting long enough. It's difficult when you also have a life on the side to run .

I'm in this game since May 2010 and trying my best possible to learn but all by myself. It's like trying to learn a diferent language with no guidance.

I also realised that scalping does not suit me.. this 20 pips daily target is not my style, too stressful/noisy for my lifestyle.

Have a good weekend guys.

A
  • #28
  • Aug 8, 2010 2:25am Aug 8, 2010 2:25am
Quoting SunTrader
For a newbie it might be and that is the point pipmutt was making.
Thanks ST, initially it was but it led to something else unfortunately!


Quoting Arona
Still on the subject... this thing of getting stopped out due 2 or 4 pips on my entry when trying to go for a long trade - 1 week - is driving me insane.... tried 30pips and then 39 pips SL and didn't work.. maybe I am being too impatience on my entries and not waiting long enough.
How are you deciding where to enter, where to place your stop, and where to have your target?

Why not post a chart of a typical trade, complete with stops and targets, then we can see what you're doing.

You mentioned long so we'll use long in an example......

Identify the significant low and high you're going to draw your Fib levels from and to. Decide where you're going to enter. Place your stop somewhere below the 100.0% low (on the basis that it was previous support), and for example have a target somewhere in the 127 to 161.8 extension area. If price breaks above the 0.0% high (previous resistance) then perhaps move your stop to just below the retracement swing low (50% or 61.8% or whatever).

That is just one very simplified approach to get an understanding of what you're drawing and it's significance, there are many many variations and like I mentioned before there's a lot more to it (someone mentioned confluence), but you have to start somewhere and keeping it simple initially seems like a good idea!

Does any of that help or are you still confused?


http://i36.tinypic.com/6oey6f.jpg
  • #29
  • Aug 8, 2010 2:29am Aug 8, 2010 2:29am
Quoting SunTrader
For a newbie it might be and that is the point pipmutt was making.
Fair enough, one of the charts (now removed) was confusing due to the short-comings of the MT4 fib tool.

And i answered the question arising I thought, but when that was followed up by

Quote
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......

things seemed to go from point-making to point-scoring, while the point I was trying to make was completely disregarded - not very encouraging for making further contributions.
  • #30
  • Aug 8, 2010 2:40am Aug 8, 2010 2:40am
Quoting medici
Fair enough, one of the charts (now removed) was confusing due to the short-comings of the MT4 fib tool.
It's not the tools fault, MT4 is versatile enough to allow parameters to be user defined. I respectfully suggested you change them so that levels drawn were correct and unambiguous but in your wisdom you ignored the suggestion. That's your prerogative but please don't blame the tool.

Quoting medici
the point I was trying to make was completely disregarded
Perhaps overshadowed by the incorrect levels and the arrow (which incidentally you still haven't explained!), and the subsequesnt sidestepping. What was the point you were trying to make?
  • #31
  • Aug 8, 2010 3:09am Aug 8, 2010 3:09am
Quoting pipmutt
It's not the tools fault, MT4 is versatile enough to allow parameters to be user defined. I respectfully suggested you change them so that levels drawn were correct and unambiguous but in your wisdom you ignored the suggestion. That's your prerogative but please don't blame the tool.
I'll correct that - shortcomings of the tool as configured on my machine, which I am too lazy to change, as it works fine for me.

And the chart has been removed. Can we leave that then?

Quote
What was the point you were trying to make?

That your statement that fibs are drawn "Based on significant highs and lows, period." is perhaps not only misleading and confusing, but incorrect. I can understand if you in your wisdom chose to ignore that. One more chart from Friday to illustrate my point.
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  • #32
  • Aug 8, 2010 3:28am Aug 8, 2010 3:28am
Quoting medici

That your statement that fibs are drawn "Based on significant highs and lows, period." is perhaps not only misleading and confusing, but incorrect.
That's a matter of opinion. As mentioned previously, the use of Fibonacci levels in these markets isn't an exact science and is open to individual interpretation. Elliot wavers, notorious for their differing views and counts, are a classic example!

The mention of significant highs and lows was intended to steer the OP's focus away from the idea that trading session opening/closing prices and times were somehow relevant to drawing Fibonacci levels. It's at the beginning of the thread if you care to read it.

I'm happy to discuss the merits, or otherwise, of using various highs and lows but I doubt it will be all that productive as there is no definitive 'correct' or 'incorrect', only individual interpretation and one's own personal experience of what works for them.
  • #33
  • Aug 8, 2010 6:23am Aug 8, 2010 6:23am
Quoting pipmutt
That's a matter of opinion. As mentioned previously, the use of Fibonacci levels in these markets isn't an exact science and is open to individual interpretation. Elliot wavers, notorious for their differing views and counts, are a classic example!
One thing that is for sure is that it is not a matter of opinion. Whether a level provides support/resistance or not is objectively verifiable.

That NY dealers identified levels as depicted in my last post is also plain to see without resorting to subjectivity.

And that most people disagree need not be a sign of things being subject to individual interpretation - it may simply indicate that the truth eludes the majority.

Quote
The mention of significant highs and lows was intended to steer the OP's focus away from the idea that trading session opening/closing prices and times were somehow relevant to drawing Fibonacci levels.

But they are relevant! Those session ranges, and the corresponding Fibonacci levels, are often very useful and profitable. In fact, the chart posted by you above is an example of it.

Quote
I'm happy to discuss the merits, or otherwise, of using various highs and lows but I doubt it will be all that productive as there is no definitive 'correct' or 'incorrect', only individual interpretation and one's own personal experience of what works for them.

I agree that it might not be that productive...but not for the reasons you state. There is definitely 'correct' and 'incorrect' when it comes to identifying the levels that major market participants cluster their orders around - the objective test being whether they provide support/resistance or not. Certainly, it's a matter of contextual interpretation when and how to apply the Fibonacci levels, but there are steadfast rules for it that you may gain an understanding of with some practice.

Instead of listening to the quibbling here, Arona, for which I am truly sorry, I would suggest that you take a look at Bobokus' thread

http://www.forexfactory.com/showthread.php?t=50767

which is the best source on Fibonacci trading for newbies that I have found here on FF. There's a pdf and lots of video material, and the thread is still active.

Nice Sunday to all!
  • #34
  • Edited 10:35am Aug 8, 2010 10:00am | Edited 10:35am
Quoting medici
But they are relevant! Those session ranges, and the corresponding Fibonacci levels, are often very useful and profitable.
They're unlikely to be for the OP at this stage, a confused novice, in the rookie section, trying to discover which way is up!

Quoting medici
There is definitely 'correct' and 'incorrect' when it comes to identifying the levels that major market participants cluster their orders around - the objective test being whether they provide support/resistance or not.
lol, that again is subject to interpretation at the time, there is no way for us to know where orders are clustered, we can only speculate and act accordingly. 'major market participants' aren't willing to show their intentions so openly, it's the nature of the game.

Your objective test cannot be proved or disproved correct or incorrect until after the event, which for practical trading purposes serves no purpose whatsoever (unless you're one of those hindsight traders or your brôker allows you to trade on yesterday's prices!!)

By the time we come to trade a retracement resistance and support have already been identified, it's where we drew the start and end of a move and calculated our Fib levels from. All we know is that those levels held before but there's no guarantee they will hold in the future. That again is something which is open to interpretation and personal opinon.

Quoting medici
Certainly, it's a matter of contextual interpretation when and how to apply the Fibonacci levels
Well at least we agree on something, that was the point I was making, in trading they're not an exact science! Ergo, when it comes to applying Fibonacci levels in the market there is no definitive 'correct' or 'incorrect', only individual interpretation and one's own personal experience of what works for them.


Yes, nice Sunday to you also!
  • #35
  • Aug 8, 2010 10:32am Aug 8, 2010 10:32am
Quoting pipmutt

Your objective test cannot be proved or disproved correct or incorrect until after the event, which for practical trading purposes serves no purpose whatsoever (unless you're one of those hindsight traders or your brôker allows you to trade on yesterday's prices!!)
Let's clear out some possible misunderstanding here.

First, I certainly didn't mean 100% certainty in advance, and I can't quite see how what I wrote could be interpreted as such. Rather, in the context of a trading strategy/method one can gather objective statistical evidence that the levels identified 'work'. And that is useful for trading purposes.

Second, and I believe of some instructive value for rookies, one may get verification of the identified levels prior to the set-up emerging. The Euro chart above is a good example:

On the 16th of June, the 23.6%, 38.2% and 50% levels act as support and resistance on several occasions verifying that the identified range and levels are the correct ones. During the later part of the Asian session on the 17th price is contained in a range between the 38.2% and 50% levels. So when price just after the 8am fix breaks through the 50% levels down to the 61.8% level while the medium term trend is up, that is a set-up for a long to be entered depending on the rules of one trading method.

For some, trading based on market structure and being familiar with the kind of tricks employed around the 8am fix, it would be an obvious long from the 61.8% itself. For others, more quantitatively inclined, it would after some confirmation be a system long in the hourly time-frame. See for example http://www.forexfactory.com/showthread.php?t=75922. And there are of course an infinity of other ways to play it.

Now some more weekend before it's time to fire up the screens again.

Be well
  • #36
  • Aug 8, 2010 10:39am Aug 8, 2010 10:39am
-


Hindsight is a wonderful thing!

Me, I prefer to keep things relatively simple because I've never found any benefit in complicating them unnecessarily, hence the tag line under my username! My philosophy in trading as well as in life come to that!

Quoting medici
Be well
You too!
  • #37
  • Aug 8, 2010 10:50am Aug 8, 2010 10:50am
IMO also believe that newbies should concentrate on H's and L's until they find what works best for them.

Retracements can also be used on closing prices (on higher timeframes) and there are retracements that are based on the % of the move. In other words a percentage of the percent move.

Each are effective (or not) in their own way.

But looking at the same 15 min EU chart when I draw a low to high retracement ( green # 1 to green #2 - 38.2% level ) it seems to have captured the bounce @ 115pm ET.

Also just to show how I use projections measuring the previous major downswing and projecting off the top -( numbers(1) to (2) to (3) - 61.8% level ) lands right in the same zone.
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  • #38
  • Aug 8, 2010 11:24am Aug 8, 2010 11:24am
Quoting SunTrader
Also just to show how I use projections measuring the previous major downswing and projecting off the top -( numbers(1) to (2) to (3) - 61.8% level ) lands right in the same zone.
I've not used that one before, how is it calculated, 61.8 of (1) to (2) projected from (1) to give the level or is it projected from green 1, or ??

No I'm not getting it, where did (3) come in?

And is that MAOSC for spotting divergence?

edit: it's ok, got it I think, FE 61.8 right?

edit 2: Nope, I don't think that's it.....
  • #39
  • Aug 8, 2010 12:14pm Aug 8, 2010 12:14pm
Ok maybe separating them into 2 screen shots might make it clearer.

First is fib retracments done as usual drawn from low #1 to high #2 and then second is fib projection which some software refer to (incorrectly IMO) as fib extension drawn on previous swing #1 to #2 and projected down from #3.

I left the reference lines showing the points drawn from as well as all the different levels, except 23.6% which on short term I don't believe is as important.

I use MAOsc for help in wave counting.

HTH
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  • #40
  • Aug 8, 2010 2:40pm Aug 8, 2010 2:40pm
Quoting SunTrader
Ok maybe separating them into 2 screen shots might make it clearer.

First is fib retracments done as usual drawn from low #1 to high #2 and then second is fib projection which some software refer to (incorrectly IMO) as fib extension drawn on previous swing #1 to #2 and projected down from #3.

I left the reference lines showing the points drawn from as well as all the different levels, except 23.6% which on short term I don't believe is as important.

I use MAOsc for help in wave counting.

HTH
Ok, cheers for that, it's not a tool I've used.
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