At the end of the day its just a tool to map the market. It's wrong to think in terms of does it work or not. It all depends on how you use it in your strategy, how you see the market. The significance of it is, is that whichever fib tool you use, it can be made made repeatable and standardised.
I do not use it but I believe it does have some use. Firstly, because it is self-fulfilling, many people use it -(so you could use it against them). Secondly, it could be a psychological gauge of the market - hence the significance of the non-fib 50% level. Beyond 50% retracement of a swing, the masses might start to no longer think short but long simply because the market no longer looks short (and vice versa)- Their thinking is, if they wait any longer they might miss the move back up to the top of the swing. This additional liquidity attracts more informed traders to sell into these panick buyers and the market begins to turn back down. At 61.8% this panick buying may seemingly be more urgent for the masses who think they'll miss the move up.
Given that the forex market is very chart orientated to both professional and amateaur retail traders, an interesting study would be to see if the clearer the swing retracement the more defined/accurate the turning points are at fib ratios, both in terms of the self-fullfilling mechanism and because panick buyers/sellers see the market structure more clearly and hence get more emotionally involved more easily. Food for thought.
I do not use it but I believe it does have some use. Firstly, because it is self-fulfilling, many people use it -(so you could use it against them). Secondly, it could be a psychological gauge of the market - hence the significance of the non-fib 50% level. Beyond 50% retracement of a swing, the masses might start to no longer think short but long simply because the market no longer looks short (and vice versa)- Their thinking is, if they wait any longer they might miss the move back up to the top of the swing. This additional liquidity attracts more informed traders to sell into these panick buyers and the market begins to turn back down. At 61.8% this panick buying may seemingly be more urgent for the masses who think they'll miss the move up.
Given that the forex market is very chart orientated to both professional and amateaur retail traders, an interesting study would be to see if the clearer the swing retracement the more defined/accurate the turning points are at fib ratios, both in terms of the self-fullfilling mechanism and because panick buyers/sellers see the market structure more clearly and hence get more emotionally involved more easily. Food for thought.
