Which Fibo level do YOU use and why? | Forex Factory

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Which Fibo level do YOU use and why?

  • #1
  • First Post: Jun 25, 2013 9:05am Jun 25, 2013 9:05am
Hello all...here is what will probably seem like a stupid question for many of you. Do you use Fibonacci retracements to enter? If so how do you decide WHICH level to enter at? Do you enter ALL of your risk exposure at one level, or do you scale in at certain levels?

Another question...Do you use some other form of confluence such as prior support/resistance, moving averages (if so which one), or confluent fibo levels from larger or smaller time frames?

Is there a particular method that YOU use that you've found helpful or accurate?

Thanks in advance for your constructive comments
  • #2
  • Jun 25, 2013 1:33pm Jun 25, 2013 1:33pm
Plants don't grow according to fib numbers, yet plants are described by fib numbers. But why do plants grow in a way that's described by fib so well? It's because they are trying to maximize sun exposure while minimizing shade on its leaves. So, if you were to just pick .618 for the next leaf, you'd be guessing. You'd need to know where the previous leaf was at, then all the previous leaves, because each single leaf affects where the next one will grow.

So, I don't look for a fib number, but sometimes I'll see if the level I'm looking at can be described by fib numbers. Though, sometimes leaves will grow just a little off that .618 mark, making it a .619 or .62, which then we need to get into lucas numbers. Taking this idea, can fibs be useful in the forex? Shouldn't one figure out which players are what type of "plants"? What if one of the plants leaves grew just a little off? What if the player didn't get the exact order they wanted, so they had to deal with the next best? One would need a lucas indi for that, which I don't think exists at the moment. If we knew which players were what type of plants, could we still use fib or lucas numbers? We'd have to be putting these numbers for a number of players, something I don't think can be done with a forex chart.
Play the players, not the cards.
  • #3
  • Jun 25, 2013 2:32pm Jun 25, 2013 2:32pm
Well,I usually try Fibs(actually they tell fibs ! when I am losing hope and looking for that magic indi.
but this dude swears by them,and from what ive seen he is very profitable.
http://www.forexfactory.com/showthread.php?t=243924
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #4
  • Jun 26, 2013 4:23am Jun 26, 2013 4:23am
The most important 'Fibo' value is 50%.
  • #5
  • Jun 26, 2013 6:33pm Jun 26, 2013 6:33pm
Quoting Pg Fx
The most important 'Fibo' value is 50%.
Thank you for your comment but its a little light on facts. Can you expound upon this? Why is 50% the "most important" value? I would've thought that 61.8% is the most important as it represents the measurement of the "golden ratio".

Do you know of or have you done any probability studies that support this statement? I do not disbelieve you I simply wish to know more.

Thanks in advance.
  • #6
  • Jun 26, 2013 7:44pm Jun 26, 2013 7:44pm
Quoting Pg Fx
The most important 'Fibo' value is 50%.
Don't forget, 50% is the only number in there that's NOT a fib number. It was added to the fib retracement tool based on the DOW theory, which is freely available to read on the internet.
Time turns trend. - W.D. Gann
  • #7
  • Jun 26, 2013 11:26pm Jun 26, 2013 11:26pm
Quoting gspajon
{quote} Thank you for your comment but its a little light on facts. Can you expound upon this? Why is 50% the "most important" value? I would've thought that 61.8% is the most important as it represents the measurement of the "golden ratio". Do you know of or have you done any probability studies that support this statement? I do not disbelieve you I simply wish to know more. Thanks in advance.
There have been scientific research showing that Fib 61.8 value is not any important than 60.0 or 62.0.

Do you think number 38.2 is really more crucial than 36.0?
or 23.6 more significant than 25.0 ??

Do more seaching and you will know the answer.
  • #8
  • Edited 11:26am Jun 27, 2013 8:07am | Edited 11:26am
Quoting Pg Fx
{quote} There have been scientific research showing that Fib 61.8 value is not any important than 60.0 or 62.0. Do you think number 38.2 is really more crucial than 36.0? or 23.6 more significant than 25.0 ?? Do more seaching and you will know the answer.
Again, thank you for your response. But I am still not seeing anything to substantiate what you refer to as scientific research. Of course price will rarely (if ever) turn at exactly the given Fibonacci level. Price action is just not that precise. What I am trying to find is a way to target a specific area of the Fibonacci scale, that has some statistical probability.

I have done my own study of the different levels and have found the price will strike and reverse as follows:

  1. 38.2 - level - 4% of the time
  2. 50.0 - level - 35% of the time
  3. 61.8 - level - 25% of the time
  4. 78.6 - level - 12% of the time

In addition, a total failure of the Fibonacci structure (i.e. retrace to 100% or more - reversal) occurs 28% of the time. This tells me that there is a 70% chance that price will rejoin a given trend somewhere within this structure. That is more than just chance. Additionally, if the Fibonacci structure does fail, it is most likely that the market is transitioning to reversal of trend or at least ranging conditions.

I have looked at confluence with different structures as well. Confluence with support/resistance levels (very subjective), moving averages of varying lengths, different Fibonacci calculations from varying time frames, as well as Fibonacci expansion calculations. To date I have found nothing that is statistically significant or greater than just chance.

My purpose in opening this thread was to seek ideas from those of you who actually use Fibonacci levels in their trading with consistent results, and see if I can find a way to target specific levels for entry and/or exit that creates a statistical edge. Whether price bounces at 61.8, 62, 65, or whatever, is meaningless. The point is that if price does strike this level, there is a 64% probability that it will return to the trend and provide a significant lead on the market.

I guess my question is: what other factors can be added to the Fibonacci retracement sequence to create a greater statistical probability of reversal at a given point along this scale.

  • #9
  • Jun 27, 2013 8:44am Jun 27, 2013 8:44am
gspajon,

This is good stuff thank you very much for sharing your information. My reaction is the only way to create* a greater probability is through confluence of other indicators (*scarey word). I think a fib level on its own is just as significant as a S/R level or a trendline. Then again the more i get into this (4 years so far) the more i believe all we can do is pick a direction and try to get the best position for what we think and apply conservative MM. I know, I know, broken record stuff on here. Anyway we get to see a fib level play out on the EURo right now.

Again i appreciate a thread started that makes me go back and question everything
  • #10
  • Jun 27, 2013 8:46am Jun 27, 2013 8:46am
The 0% and 100% levels mainly
Time hides Nothing
  • #11
  • Jun 27, 2013 10:55am Jun 27, 2013 10:55am
I like the 50% level the most because beyond that point your reward to risk ratio jumps above parity, but then on another note it could also indicate "weakness".
  • #12
  • Jun 28, 2013 6:06am Jun 28, 2013 6:06am
I prefer 0.50 & 0.618 levels to consider possible retracement. Most of the time works for me.
  • #13
  • Jun 28, 2013 8:51am Jun 28, 2013 8:51am
I look for extreme levels of 10% or 90% bounces.
Find your Favourite Pattern
  • #14
  • Jun 28, 2013 10:53am Jun 28, 2013 10:53am
Quoting gspajon
{quote} Again, thank you for your response. But I am still not seeing anything to substantiate what you refer to as scientific research. Of course price will rarely (if ever) turn at exactly the given Fibonacci level. Price action is just not that precise. What I am trying to find is a way to target a specific area of the Fibonacci scale, that has some statistical probability. I have done my own study of the different levels and have found the price will strike and reverse as follows: 38.2 - level - 4% of the time 50.0 - level - 35% of the time...
Hello gspajon. It seems you may have already found what you're looking for. If I understood correctly your research results, price reverses to 0% from combined levels 50% + 61.8% about 60% of the time. That being the case, entering an order at 50% with target at 0% and stop at 100% would allow for a positive win% with almost 1:1 RR. The favorable win% should be able to offset spreads and slippage.

This makes a lot of sense, since 50% retrace is the most significant level from a psychological view. 50% is half the cost, something newbies and experts will use alike when trying to determine the value of something.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #15
  • Jun 28, 2013 11:03am Jun 28, 2013 11:03am
Quoting vox dei
{quote} Hello gspajon. It seems you may have already found what you're looking for. If I understood correctly your research results, price reverses to 0% from combined levels 50% + 61.8% about 60% of the time. That being the case, entering an order at 50% with target at 0% and stop at 100% would allow for a positive win% with almost 1:1 RR. The favorable win% should be able to offset spreads and slippage. This makes a lot of sense, since 50% retrace is the most significant level from a psychological view. 50% is half the cost, something newbies...
Thank you for your response vox dei (are you really the voice of god?). I have determined that, yes indeed, there is a statistical edge that exists within the fibonacci structure and I am currently using with good results. With my current method I divide my risk between the various levels...60% of the risk at 50, 20% at 61.8 and so on. However, what ends up happening is that the resulting "average" price is far lower than if I could specifically target the most probable area for a bounce. Using the number alone I have determined the edge exists I am now trying to "fine tune" it with an additional factor that may prove consistent and allow me to target me risk entry more specifically and perhaps place larger position sizes, thereby resulting in larger gains, while still containing the same risk exposure.

This is why I'm asking others for ideas on how they use the fibo levels to find ideas that I can then test. I'm happy to share the results but so far I only get responses like those above. They state a level and nothing more...nothing on WHY this level is used or if it is consistently profitable...
  • #16
  • Jun 28, 2013 12:12pm Jun 28, 2013 12:12pm
Nope, not the voice of god. It is a reference to Thor, the norse god of thunder. I used to play real time strategy games under that nickname during college years, and always imagined the voice of god as something imposing like the sound of thunder.

Have you tested confluence between fibonacci and OHLC and/or pivots levels? From my experience, daily/weekly/monthly OHLC levels + central Pivot can be pretty significant at times.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #17
  • Jun 28, 2013 5:45pm Jun 28, 2013 5:45pm
Quoting gspajon
{quote} Again, thank you for your response. But I am still not seeing anything to substantiate what you refer to as scientific research. Of course price will rarely (if ever) turn at exactly the given Fibonacci level. Price action is just not that precise. What I am trying to find is a way to target a specific area of the Fibonacci scale, that has some statistical probability. I have done my own study of the different levels and have found the price will strike and reverse as follows: 38.2 - level - 4% of the time 50.0 - level - 35% of the time...
I'm a little curious since you've actually got some numbers down. I see that you say "exactly the given level" and I wonder if you mean the EXACT level, to the very tenth of a pip. Then, which pairs did you test? Did you happen to test the currencies by themselves? (futures) I think I had one more question, but I forgot.
Play the players, not the cards.
  • #18
  • Jun 28, 2013 9:24pm Jun 28, 2013 9:24pm
I don't like fibo's or fibs
I like pivots. I don't have to "draw" a FIB. I'm lazy
and let pivots work.....

I mean..... just lookie here
(so much easier)
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When the Joker is in the deck.. fear not and play it well
  • #19
  • Jun 28, 2013 10:37pm Jun 28, 2013 10:37pm
With this E/U H4 chart, I just took the numbers in increments of 0.125 (12.5%) On higher time frames, I'll use increments of 0.25 And 0.50 on even larger time frames. Where I look at each line in regards to degrees. (On a horizontal aspect).
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Time turns trend. - W.D. Gann
  • #20
  • Jun 28, 2013 10:41pm Jun 28, 2013 10:41pm
Then, with the same chart, throw on the fib time zones, with the same concept, and trade accordingly. (Think outside of the box, then trade inside of it).
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Time turns trend. - W.D. Gann
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