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Why do people use Fibonacci in trading?

  • #301
  • Apr 23, 2013 10:44am Apr 23, 2013 10:44am
  •  traade
  • | Joined Apr 2013 | Status: the market knows every move u got | 14 Posts
Quoting DemoAntares
If u take a chart (doesn't matter which timeframe) and put fibo levels only u will have more ''good signals'' than if u used any other non-ratio indicators (ma, momentum, channels etc...)........................... All impossible without Fibonacci.
I challenge anyone who strongly believes in fib. analysis to prove me wrong that 10%, 20%, 30%,...,80%, 90%, retracement levels or 200%, 300%, 400% extension levels are less powerful than fib. retracement/extension levels. I believe that fib. analysis is just experiencing a bubble phase in its popularity progression in trading. come to think of it, retail trading on computers is just a few decades old. Its probably still going to be around in the next 100 years to come and its quite obvious that the things we value today in technical analysis could be totally obsolete tomorrow. If we take this assumption then fib. analysis could be the equivalent of flat earth model in relation to what the future holds.
  • #302
  • Apr 23, 2013 11:33am Apr 23, 2013 11:33am
Quoting traade
{quote} I challenge anyone who strongly believes in fib. analysis to prove me wrong that 10%, 20%, 30%,...,80%, 90%, retracement levels or 200%, 300%, 400% extension levels are less powerful than fib. retracement/extension levels. I believe that fib. analysis is just experiencing a bubble phase in its popularity progression in trading. come to think of it, retail trading on computers is just a few decades old. Its probably still going to be around in the next 100 years to come and its quite obvious that the things we value today in technical...
No one here owes you the effort to prove your statement right or wrong. Rather, it is your responsibility to prove any statement you make. I've posted (here and in my Journal) how I use fibs in my trading, and can state that they have worked in the manner I've described for the entire 10 years that I have been trading, which would make that quite a "bubble phase". If you believe the effort to learn how to use fibs is not worth the effort (because one day within the next 100 years, using fibs may be obsolete) then move on and try something else. But for the record, they were relevant yesterday, were relevant today in my trades, and, I am betting, will be for the foreseeable future. If they don't work a hundred years from now, or even 10 years from now, that is ok, because I'll be done trading by then.
  • #303
  • Apr 23, 2013 1:14pm Apr 23, 2013 1:14pm
I've used fibs in the past for years, but you're right... you never know what level the price will bounce on.

Even though there is a good chance it will bounce on one of the fib levels, there is no way of knowing which one. So you buy on the 32, and price falls to the 50, you buy on the 50 then it falls yet again.

There was a very popular fib thread on there by a member named "bobokus" before he left and started his own trading site.
  • #304
  • Apr 23, 2013 1:26pm Apr 23, 2013 1:26pm
@traade

I agree with GEFx

What's confusing you is that there are too many levels to work with plus new ones that you & others have added into the mix. I can understand the frustration, I have been there- trust me. If you spend the time to analyse which levels are relevant & discard everything else, then you will see the reality trading with fibs.

The sad reality is that the majority of people do not know how to use fibs properly and that includes some professional tutors also. No wonder it gets a bad name amongst traders.

In my opinion, I find the standard fib tool undervalued, mis-used and maligned.
It never gets easier, you just get better
  • #305
  • Apr 23, 2013 1:29pm Apr 23, 2013 1:29pm
Quoting ForExtraPips
It's kind of hard to come out with a computer program to tell it what to do, when the person programming it doesn't have a clue. {image}
Thumbs up to the quote!!!
  • #306
  • Apr 23, 2013 2:09pm Apr 23, 2013 2:09pm
  •  traade
  • | Joined Apr 2013 | Status: the market knows every move u got | 14 Posts
Quoting GEfx
No one here owes you the effort to prove your statement right or wrong. Rather, it is your responsibility to prove any statement you make. I've posted (here and in my Journal) how I use fibs in my trading...........
The thread topic is "Why do people use Fibonacci in trading?" I am just trying to make my small contribution to the thread by saying out my thoughts. if fib. analysis works for you then fine but the thread topic is why do people use Fibonacci in trading. my proof is that if you have access to any chart with a large enough sample of data any (normal distr. random or crazy random) retracement or extension is as good as a fib. level plus I don't need a journal as proof. I have come across some well put out literature and videos on fib. stuff and I must admit that after reading/watching I get hyped out until the market reminds me of the truth which is that, "the market is always right and it owes no one an explanation of why it does its crazy thing." a friend once told me that if your system is always working in your favour you should be afraid because your judgement day trade is probably gathering momentum and just waiting for the right time for you to get comfortable.
  • #307
  • Apr 23, 2013 2:31pm Apr 23, 2013 2:31pm
Quoting traade
{quote} "the market is always right and it owes no one an explanation of why it does its crazy thing."
In fact, there is a logical explanation for everything the market does, and while there are crazy things that happen (note the yen crosses today), there is always an explanation. Look, instead of fib levels, come up with your own retracement levels. Whatever is best for you. Just remember that the thing you are trying to figure out is how best to take advantage of the axiom: the fastest way to become an ex-professional trader is to buy at the top or sell at the bottom.
  • #308
  • Apr 23, 2013 3:38pm Apr 23, 2013 3:38pm
Trading is predicting the future based on statistical analysis. That analysis is either technical, fundamental, or a blend of both.

Business owners do the same. A coffee shop owner staffs for Tuesday traffic based on analysis. A grocer buys vegetables based on analysis.

Are they always efficient? Are they always right?

No.

Do their models allow for risk tolerance?

Yes!!!

Successful businessmen build business models that allow them to be accurate only part of the time and still be in the green!!!

Fibs are no different from any other approach. There's value, but there isn't "The Hand of God" value in every Fib. That's ridiculous to imagine, and foolish "Holy Grail" nonsense to even argue about.

If you're having problems with success in trading it probably has more to do with the overall system than your entries. TM; MM; etc.

Before Fibs, before MAs, people who are struggling need to start here. The facts are plain; in truth this data is now mandated to be released by US brokers due to governing agencies here in the States:

Inserted Video
  • #309
  • Apr 24, 2013 2:54pm Apr 24, 2013 2:54pm
Before I learnt Elliott Wave analysis I was straight-out annoyed by Fibs because of the perceived inconsistency with which PA would hit the 0.382 level and retrace one hour and then ignore it the next in preference of another (or none!).

Now that I am familiar with which waves have a preference for which Fib levels I am no longer disappointed if PA fails to react at an expected level, but rather get clues as to how the rest of the advance will unfold (i.e additional Fib extension targets can be calculated). Complete failure, e.g. NOT hitting a Fib level at reversal, warns that my wave count is wrong and that PA is in corrective mode. On the other hand, when PA hits the appropriate level EXACTLY this confirms a wave count and allows for high probability entries.

There are three critical assumptions from an EW perspective here:

1) Fibs are most reliable in impulsive waves. e.g. wave 2 will retrace 0.618 of wave 1 eighty percent of the time. In the case of a 0.618 retracement by wave 2, wave 4 will almost certainly retrace 0.382 of wave 3.

2) When you see an expected Fib level causing reaction and reversal, this is not the entry signal. A more reliable entry signal is the subsequent confirmation by PA when it traces out a small 5 wave impulse, followed by a 3 wave retracement (to 0.618 of the aforementioned 5w impulse).

3) Should you see PA retracing to 50% and 76.8% then you are most certainly in a corrective wave structure which will mess with your psychology and your account. Stay out until you can establish a Fib relationship (lengthwise) between wave A and wave C of the correction and then look for a high probability entry.

In my experience indicators are most useful during impulsive waves with perhaps 80% reliability. Fibs, however, are 100% reliable during an impulse with respect to at least 2 of the following: a) the retracements of waves 2 and 4, b) the length of waves 3 and 5 being Fib multiples of wave 1, and c) the entire wave being divided into .382/.618 sections by the end of either wave 3 or 4.

Like clockwork.
cryptocurrency everytime
  • #310
  • Apr 24, 2013 3:03pm Apr 24, 2013 3:03pm
@ venzen.

nice addition^.

i used to heavily blend the two (fibs and wave theory), but have since swapped level analysis with wave analysis. my entries admittedly were more precise with the blend of wave and fib analysis, but the labor was exhaustive, and i've since made amendments to my tm/mm to tolerate slightly less precise entry areas.

Quoting venzen
In my experience indicators are most useful during impulsive waves with perhaps 80% reliability. Fibs, however, are 100% reliable during an impulse with regards to at least 2 of the following: a) the retracements of waves 2 and 4, b) the length of waves 3 and 5 being Fib multiples of wave 1, and c) the entire wave being divided into .382/.618 sections by the end of either wave 3 or 4. Like clockwork.
it would be great if you could post a chart of this!
  • #311
  • Apr 24, 2013 3:11pm Apr 24, 2013 3:11pm
Could it be that E/U is dancing between .... pivots ??

idk.... I remain flat 'til the next Great Sell (if/when)
Attached Image (click to enlarge)
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When the Joker is in the deck.. fear not and play it well
  • #312
  • Apr 24, 2013 3:22pm Apr 24, 2013 3:22pm
Could this pattern be influential????
idk... but IF I were to believe a return to .3155
might seem doable

no fibbin'... just pivotin' ?? (I remain flat... just b'cuz)
Attached Image (click to enlarge)
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When the Joker is in the deck.. fear not and play it well
  • #313
  • Apr 24, 2013 4:06pm Apr 24, 2013 4:06pm
Quoting venzen
Before I learnt Elliott Wave analysis I was straight-out annoyed by Fibs because of the perceived inconsistency with which PA would hit the 0.382 level and retrace one hour and then ignore it the next in preference of another (or none!). Now that I am familiar with which waves have a preference for which Fib levels I am no longer disappointed if PA fails to react at an expected level, but rather get clues as to how the rest of the advance will unfold (i.e additional Fib extension targets can be calculated). Complete failure, e.g. NOT hitting a Fib...
Well done and thanks for sharing your insight. I've never been an EW trader, so this is some good food for thought. Waves are part of my TA of market structure, but not really part of the trading approach. Good trading!
  • #314
  • Apr 24, 2013 4:17pm Apr 24, 2013 4:17pm
Still.... the .3041 pivot seems important

I don't know why... it's only a pivot
and anyway... I'm flat and don't much care.
Attached Image (click to enlarge)
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When the Joker is in the deck.. fear not and play it well
  • #315
  • Apr 24, 2013 4:43pm Apr 24, 2013 4:43pm
Quoting venzen
Before I learnt Elliott Wave analysis I was straight-out annoyed by Fibs because of the perceived inconsistency with which PA would hit the 0.382 level and retrace one hour and then ignore it the next in preference of another (or none!). Now that I am familiar with which waves have a preference for which Fib levels I am no longer disappointed if PA fails to react at an expected level, but rather get clues as to how the rest of the advance will unfold (i.e additional Fib extension targets can be calculated). Complete failure, e.g. NOT hitting a Fib...
Nothing to add - this is what every trader should know, especially a swinger or daytrader.
  • #316
  • Apr 24, 2013 4:55pm Apr 24, 2013 4:55pm
Quoting DemoAntares
{quote} Nothing to add - this is what every trader should know, especially a swinger or daytrader.

But they should not forget about ...wut??? PIVOTS !!
It's what every trader should be aware of.

(especially a "swinger")

right??
When the Joker is in the deck.. fear not and play it well
  • #317
  • Apr 24, 2013 5:10pm Apr 24, 2013 5:10pm
It's like... check this out... can ya' see the,
wut??? pivots???
an occasional MA might be helpful... idk

Dance with pivots and forget about crowding your
mind with................ (unneeded clutter) ??
Attached Image (click to enlarge)
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When the Joker is in the deck.. fear not and play it well
  • #318
  • Apr 24, 2013 5:11pm Apr 24, 2013 5:11pm
Quoting Slim Buffett
{quote} But they should not forget about ...wut??? PIVOTS !! It's what every trader should be aware of. (especially a "swinger") right??
Of course! Trendlines (channels) - therefore pivots; + fibonacci and some ma's and maybe bollinger with (2nd and 3rd deviation) to get a ''feel'' of a momentum behind a potential move - does the trick for me - a couple of years ago while I dug myself in tons of mathematics (cuz I'm very good at it) I had 15% positive trades (daytrade) (burned account 2 times) - now (last 2, when I stopped using those stupid adx, rsi (the most stupid indicator ever in my not so humble opinion) - I say not so humble cuz last 400 trades (of which not even 20 positions were more than 24 hours) - 320 positive.
But...one thing I would like to learn at the moment but I feel that in order to do it I need much more experience - candle patterns and everything about candles in general - like Steve Nisson. My father is a very successful trader and all he uses is 20, 50, 200 sma and candles. He (believe it or not) has 92% positive trades but he is not a daytrader (He is trading since 2007). Damn he's got more positive trades than Jessie Livermoore. I've seen him in action sooo many times and that kind of control is amazing - it is like art what he does using only 3 measly ma's and of course he is drawing lines like mad and sometimes, but rarely, he uses fibo...
  • #319
  • Edited 6:35pm Apr 24, 2013 6:33pm | Edited 6:35pm
Quoting Slim Buffett
It's like... check this out... can ya' see the, wut??? pivots??? an occasional MA might be helpful... idk Dance with pivots and forget about crowding your mind with................ (unneeded clutter) ?? {image}

So, when prices hits weekly S1, buy? What about stops? Should we place those? What if we buy at S1 and price hits S2? Should we stay in, or get out? What about monthly? What if price is at MR2, but WS1? What about daily? Hourly? Do you know the equation for your pivot points? Does it account for just the close, does it account for open and close?

If you're arrows are when you got in, you should drop the pivots because you are missing out. Like with the eur/usd you had posted... If you watched the USDX and were anticipating a correction to 81.5~, you would've been able to buy up the dollars on the forex at Eur/Usd 1.32~. No pivots needed, no MAs, no technical except for price, only fundamental was what the Federal Reserve was up to.

Maybe someone can do some fib stuff with the Fed's balance sheet? Wonder what that would result in...
Play the players, not the cards.
  • #320
  • Apr 24, 2013 6:47pm Apr 24, 2013 6:47pm
Quoting GnarlyPips
{quote} If you watched the USDX and were anticipating a correction to 81.5~, you would've been able to buy up the dollars on the forex at Eur/Usd 1.32~. No pivots needed, no MAs, no technical except for price, only fundamental was what the Federal Reserve was up to. Maybe someone can do some fib stuff with the Fed's balance sheet? Wonder what that would result in...
You're somewhat unclear.... so you're saying that rather than paying attention
to pivots I should watch the USDX and should have noticed the 81.5 and I should
be a brain reader with regards to what the Fed is up to. Is that correct?

yes, that seems much simpler (if so)
When the Joker is in the deck.. fear not and play it well
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