Cable: Measuring Fibonacci From Where ?

Lets say there is an upward move, like today on Cable.

The high, at the time of writing is 1.7726.

Prior to the move there was a range between 1.7564 and 1.7601

So what lower value do you use in order to get the retracement levels for this long move ? The bottom of the range or the top ? The range in question was the London session prior to the break long.

I have always tended to go for the bottom of the range, though would be interested to hear comments.

Perhaps one could do both and end up with zones for each level rather than trying to get anal about pinpointing the level.

A good trading week ahead to all.

It is sometimes tough to know where to fib levels in strong moves like todays, I like to look for confluence between retracement and extension levels, below is how I have my fib levels currently.

http://img71.imageshack.us/img71/2893/gbpusd5mh.gif

Please explain which two calculations you used to get the 2 readings (confluence) at 1.7640.

I understand one is the retracement of the move, though I do not see what the other is.

Chart blindness !

Sure thing, here are the two tools shown above, but seperate to help:

http://img377.imageshack.us/img377/337/gbpusd13jr.gif

http://img516.imageshack.us/img516/9400/gbpusd29oj.gif


So chart 1 is the fib extension of the swing into this move up, chart 2 is a standard fibonacci retracement measurement.

All sounds wonderfully logical in theory .. the market though tends not to listen to theory though .. 2am .. must sleep ...

A third chart is below showing why I consider the current peak to be a valid top for a retracement, it has turned at the 261.8 retracement if the swing into this move:

http://img516.imageshack.us/img516/7646/gbpusd36sh.gif

Note what is sitting right around the confluence point of the other charts? .. the 161.8 level ... ill be watching this area closely.

That is a great explanation, many thanks.

Currently I just use Fib Retracements, I am going to monitor the Fib Extentions FNO.

Which do you consider the best material you have read on Fibonacci ?

I got going with this link, perhaps a year ago now:

http://www.enthios.com/Lessons/Tradi...acciPrimer.htm

http://img377.imageshack.us/img377/337/gbpusd13jr.gif

In this example to get the extention reading you are multiplying the move down size by 1.382, 1.618, 2.618 to get the posible extention higher. Is that correct ?

I do not quite understand why the 161.8 is below the 100, should it not be above ?

I find that many different traders are using Fibs in slightly different ways, with regards to both retracements and extentions.

As I wrote previously, I have just been using Fib Retracements, though I only enter trades when they are in the same zone as other evidence, such as previous lows (or highs for shorts).

Well the fib extension tool is looking for symmetry between swings, so the 100.0 level is a measure of the original swing projected down from the peak. The 161.8 is 1.618 times the height of the original swing, projected down from the peak. I've tried to show that below, hope it makes sense:

http://img240.imageshack.us/img240/430/gbpusd40eg.gif


I don't really have a source of information on fibonacci, I tend to just use my interpretation of what I have read in the past.

Hi Akuma. Are you using M4 and is that extention tool part of it? Can't seem to find it. Thanks

Hi BillyC, I assume you mean MT4 ... and yes I am using it ... if it is not in your toolbar, then go to Insert --> Fibonacci --> Expansion, hope that helps.

I strongly dissagree with your above fib retracement calculations.
It is not rational to use current high as one of your reference points.
Current high can still be pearced at any moment creating a higher high.
You cannot just assume that our current high will not be broken.
Therefore it's a good idea to use historic levels as your ref points.
Take a look:
http://img119.imageshack.us/img119/5849/cable8te.png

Hello Akuma99

That is pretty interesting analysis I like the use of the Fibonacci tool.

The Fibonacci extension tool is not part of VT so I wrote this up and had a look at what you were looking at.

Very interesting

Nicely done Claude ... your chart does highlight the point that any of the fibonacci ratios can be used, for my analysis I prefer to the 100 and 161.8 simply based on past experience, but im glad you included those in there.

There's another way to use the Fibonacci. I discovered it and I make no apology for the fact that it can't really be described in a few posts, and it would only confuse. I wrote a book on it, with my wife doing the mindset part. It reveals the framework that all currencies move by, which relates to Fibonacci ratios on all timescales. Several subscribers to this forum use it now, to some degree or other. It is a one-time setup, and it is very useful either as a stand-alone method of trading, or as part of a trading strategy with, for instance, VWB.

Because it reveals the universal framework, it takes all the guesswork out of where you put your fibs and how you interpret them.

If you think that may be useful to you, PM me or check out the website on my CP.

Just to follow this up now that the day has progressed, as I mention earlier, I only featured the 100.0 and 161.8 fib expansions, thinking these were the only two that corresponded to retracement levels. Looking back, I missed one other area as shown below, the 61.8 fib expansion and the 23.6 fib retracement, and ... well we can see what us happening at the moment.

http://img105.imageshack.us/img105/3162/gbpusd59ce.gif

Great thread Akuma! Same thoughts as you, 100 and 161.8 expansion are everywhere.

Current USDCHF 1H chart attached, a nice 161.8 expansion.

-soso

How do you "put" that expansion on charts? I mean I find the tool and all,but I`m not able to put it on the chart in right way(at least I think).I fell like slghtly retarded .

Boy this is complicated stuff! My brain hurts. I'm going for a coffee.

Oops, well I don't use the expansion tool. I use the Fibonacci Retracement tool. Just that the price does not bounce back of usual levels, but continues, as in the chart I uploaded.

-soso

The extension tool is not too hard to put on the chart, ill try to explain.

http://img108.imageshack.us/img108/8185/gbpusd63zn.gif


Look at the above chart, what we are doing is projecting expansions based on the swing into the dominating trend. This means if you have a strong move up, as is the case this time, you want to start at a point that moves down, before reversing up into the current move. This can either be the last move down before this move up began, or can be a retracement at any point in the current move.

In MT4, when you place the expansion on the chart, you are left with three draggable anchors. You need to place them on the three point marked above.

1. This is the peak of the last main swing down, into the current rise.

2. This is the valley of that swing, in this case the bottom of the short term move up. (that is the 200 SMA by the way it bounced off)

3. This is the peak you want the expansions to be projected from.

That's about it, you can use whatever ratios you want, I like the 100, 161.8 and occasionally the 61.8, but it doesn't hurt to check for other confluence points.

Just as a side note, we are now approaching the 261.8 retracement of the last retracement (chart below, notice the pause at the 161.8 level also), i would be watching for a retracement.

http://img107.imageshack.us/img107/1134/gbpusd70hb.gif