Where is the logic behind applying Fibonacci to trading? | Page 3 | Forex Factory

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Where is the logic behind applying Fibonacci to trading?

  • #41
  • Feb 5, 2016 4:08am Feb 5, 2016 4:08am
Quoting magnumfreak
draw enough lines on a chart and eventually you will find that price will "respect" at least one of those lines all the while we fail to mention the other 7 that it just passed through on the way to the one that "worked". It is like all things we put on our charts in that it is there to provide you with a way of justifying your actions as to why you bought or sold at a particular point. As with all trading methods, some will profess its absolute perfection while others will decree its absolute nonsense. Who is right and who is wrong? Who cares?...

Exactly!
Wealth comes from what you keep, not what you earn
  • #42
  • Feb 5, 2016 4:11am Feb 5, 2016 4:11am
Quoting iaveight
{quote} I can prove they work no problem, this weekend give me your skype number and we will talk and I will show you a little, if you dont it just shows you dont want to learn. Many in this game want indicators, pretty little things like a light , that means go , that means stop, without learning price action. Next you will be telling me learning price action and supply demand doesnt work either

I became profitable when I ditched indicators and subjectively drawn lines.

Price action is exactly how I trade.
I studied fibo's in the early years and after realizing that, as was said earlier, if you draw enough lines they all become valid...
So, they are of no help to me>

As i said to you..if they work for you, great...but don't try and make out they are universally obeyed.

If that was the case there would be no need for discussion!
Wealth comes from what you keep, not what you earn
  • #43
  • Feb 5, 2016 4:14am Feb 5, 2016 4:14am
Quoting trader34
{quote} Exactly!
did you ever think there are rules for trading fibs, maybe they passed through levels because that was part of the trade plan and it was expected, I could sit here and tell you exactly how I trade but why would I , at least I am open minded enough that if someone says something works I have a good look at it, back test it and see.

Granted if its with indicators I stay well away but your indicators have settings those settings are ratios, so whether you like it or not all the indicators you use are based on math and ratios just like fibs except indicators follow price, fibs will forcast price...

Better stop using indicators like Mac D, OSMA, Bollinger adx, heikin ashi LOL

sigh
  • #44
  • Feb 5, 2016 4:14am Feb 5, 2016 4:14am
I donīt use the exactly fibo-numbers. I use them more as a zone 40%-60%. The pullbacks that make 40-60% of the previous move are more accurate and harmonic. Itīs not the fibo itself that makes it work, but the people, that use them. There so many of them, so it gives the others additional odds of making the trade profitable.
  • #45
  • Feb 5, 2016 4:23am Feb 5, 2016 4:23am
Quoting trader34
{quote} I became profitable when I ditched indicators and subjectively drawn lines. Price action is exactly how I trade. I studied fibo's in the early years and after realizing that, as was said earlier, if you draw enough lines they all become valid... So, they are of no help to me> As i said to you..if they work for you, great...but don't try and make out they are universally obeyed. If that was the case there would be no need for discussion!
you also said I cant prove they work, so I took you up on the challenge.

what ever works for that person is great as long as they have at least a 70 percent win rate, if they dont then something needs to change in their trading.

They are universally obeyed in life, hence the golden ratio, or are you telling me the golden ratio is a myth ........
  • #46
  • Feb 5, 2016 4:24am Feb 5, 2016 4:24am
Quoting iaveight
{quote} How much study have you actually done with fibs, I would think not a lot ! Just my opinion, you stay to your myriad of indicators I will stick to fibs and supply demand
What makes you think I use indicators?

Anyway doesn't matter. We are all entitled to our opinions. Good luck with your chosen approach...

CCH
  • #47
  • Feb 5, 2016 4:25am Feb 5, 2016 4:25am
Quoting trader34
{quote} I became profitable when I ditched indicators and subjectively drawn lines. Price action is exactly how I trade.

See above.
I don't use any of it.

All the indicators you listed are useless, I agree.

But, users of them give them cult like status, and say:
"you just have to know the rules of them"

Sound familiar?

Quote
did you ever think there are rules for trading fibs

Sigh indeed.
Wealth comes from what you keep, not what you earn
  • #48
  • Feb 5, 2016 4:26am Feb 5, 2016 4:26am
There is a special ratio that can be used to describe the proportions of everything from nature's smallest building blocks, such as atoms, to the most advanced patterns in the universe, such as unimaginably large celestial bodies. Nature relies on this innate proportion to maintain balance, but the financial markets also seem to conform to this 'golden ratio.' Here we take a look at some technical analysis tools that have been developed to take advantage of it.
The Mathematics
Mathematicians, scientists and naturalists have known this ratio for years. It's derived from something known as the Fibonacci sequence, named after its Italian founder, Leonardo Fibonacci (whose birth is assumed to be around 1175 AD and death around 1250 AD). Each term in this sequence is simply the sum of the two preceding terms (1, 1, 2, 3, 5, 8, 13, etc.).
But this sequence is not all that important; rather, it is the quotient of the adjacent terms that possesses an amazing proportion, roughly 1.618, or its inverse 0.618. This proportion is known by many names: the golden ratio, the golden mean, PHI and the divine proportion, among others. So, why is this number so important? Well, almost everything has dimensional properties that adhere to the ratio of 1.618, so it seems to have a fundamental function for the building blocks of nature.
Prove It!
Don't believe it? Take honeybees, for example. If you divide the female bees by the male bees in any given hive, you will get 1.618. Sunflowers, which have opposing spirals of seeds, have a 1.618 ratio between the diameters of each rotation. This same ratio can be seen in relationships between different components throughout nature.


Read more: Fibonacci And The Golden Ratio | Investopedia http://www.investopedia.com/articles...#ixzz3zHv143OI
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  • #49
  • Feb 5, 2016 4:27am Feb 5, 2016 4:27am
Quoting iaveight
{quote} They are universally obeyed in life, hence the golden ratio, or are you telling me the golden ratio is a myth ........
I'm telling you the interbank market has no care whatsoever what fibo line is being broken/obeyed...

Also:

 

  1. In investing, some practitioners of technical analysis use the golden ratio to indicate support of a price level, or resistance to price increases, of a stock or commodity; after significant price changes up or down, new support and resistance levels are supposedly found at or near prices related to the starting price via the golden ratio.[93] The use of the golden ratio in investing is also related to more complicated patterns described by Fibonacci numbers (e.g. Elliott wave principle and Fibonacci retracement). However, other market analysts have published analyses suggesting that these percentages and patterns are not supported by the data.[94]

Wealth comes from what you keep, not what you earn
  • #50
  • Feb 5, 2016 4:31am Feb 5, 2016 4:31am
Quoting trader34
{quote} I'm telling you the interbank market has no care whatsoever what fibo line is being broken/obeyed... Also: In investing, some practitioners of technical analysis use the golden ratio to indicate support of a price level, or resistance to price increases, of a stock or commodity; after significant price changes up or down, new support and resistance levels are supposedly found at or near prices related to the starting price via the golden ratio.[93]...
BULL SH(**( IT

we will have to agree to disagree I wish you luck and fortune

1.14051 you can figure that one out LOL
  • #51
  • Feb 5, 2016 4:32am Feb 5, 2016 4:32am
the chart is a picture,
people thinks that it is a work of art
it have horizon, boundary, perspective ,composition, etc
limited by human imagination.
  • #52
  • Feb 5, 2016 4:32am Feb 5, 2016 4:32am
Quoting iaveight
{quote} BULL SH(**( IT we will have to agree to disagree I wish you luck and fortune
http://www.investopedia.com/articles.../fibonacci.asp
You too
Wealth comes from what you keep, not what you earn
  • #53
  • Feb 5, 2016 4:36am Feb 5, 2016 4:36am
ma supertrend osma for trigger, yes many say they dont use indicators
  • #54
  • Feb 5, 2016 4:38am Feb 5, 2016 4:38am
Quoting iaveight
ma supertrend osma for trigger, yes many say they dont use indicators

If you're referring to the so called "professional" method I was criticizing....you probably should have read the earlier posts...

I was pointing out his method was bull**it and was easy to reverse engineer
Wealth comes from what you keep, not what you earn
  • #55
  • Feb 5, 2016 5:20am Feb 5, 2016 5:20am
Quoting genghistar
{quote} I wont call it logical reason but I would rather say the right application on how to use it correctly in the specific context in forex in the areas of trends, pullbacks retracements projections etc. Price moves without hardly any logic mostly...And by the way pulling it from high to low of prices and vice versa is the wrong way to me. GS
As a strict operator of applying Fib in all my trading to follow price movements in determining both intraday and m/t hold/breach levels(support/resistant), I will personally vouch for the reliability of fib in this context of my daily fib usage. By this method I am able of making and calling out all my pre-trade fib intraday holding/breach levels which enable me to know where price will be heading if holding level held and similarly where it will be going if and when the holding level is breached. My application and usage of fib has nothing to do with whether price will respect any fib levels whatsoever. For those whose assertion that fib does not work in my usage in this context of my application would be welcome to prove that all my pre trade fib based trade calls are incorrect and unreliable and as such you shall take the opposite side of all my call to prove yourself right and myself wrong on the reliable usage of fib. I have over times have made several pre trade intraday trade calls on E/U in the trading discussion section and you will be welcome to post there to prove my application of using fib is not reliable as an effective trading tool and I shall be forever grateful and indebted to your enlightenment and wisdom. My application of fib in determining all my hold/breach(support/resistant) levels also cover the other pairs like U/J, A/U, G/U.

Cheers

GS.
  • #56
  • Feb 5, 2016 5:24am Feb 5, 2016 5:24am
Quoting iaveight
{quote} Maybe if you actually applied yourself and did some real study on them from either the FIB Queen (personally her methods are not for me) or the Black Knight (former Bank trader and expert on fibs who I learned from, you may actually learn something!!
Fibo Queen is a pupil of Robert Miner...studied both, but Miner is King...

Few people know how effective Fibos ae in time, and when combined with price...
  • #57
  • Feb 5, 2016 5:25am Feb 5, 2016 5:25am
This place is so haunted. So much "woooo woOOOOOoooo... WOOOOOOOOO!!!!!!!"

So much woo.
Congratulations ScalaFX for coming out of the closet!
  • #58
  • Feb 5, 2016 5:29am Feb 5, 2016 5:29am
Quoting iaveight
There is a special ratio that can be used to describe the proportions of everything from nature's smallest building blocks, such as atoms, to the most advanced patterns in the universe, such as unimaginably large celestial bodies. Nature relies on this innate proportion to maintain balance, but the financial markets also seem to conform to this 'golden ratio.' Here we take a look at some technical analysis tools that have been developed to take advantage of it. The Mathematics...
I think the fibs are pure supersticion for trading. You are using selective perception. Yes, fibos might "fit" on certain patterns in nature. But on how many patterns in physics does it not fit to? The market is too random (not completely random) for it to fit on a secret ratio as if nature wants to send you secret messages. And I think it is dangerously reckless to believe that nature wants you to find secret messages to use in trading. It's dangerously close to using astrology for trading, which is a very stupid thing to do.

However because markets move on what people think, if everyone believes in fibos, they do actually appear to fit.
Price-Action Extremist
  • #59
  • Feb 5, 2016 5:29am Feb 5, 2016 5:29am
Well, I can't tell you why other traders use Fibonacci levels, but I can give you a personal answer. I am using Fibonacci levels as part of my trading systems, mostly for exits and stop placement.

Why? Because I have observed that these levels are respected, often enough to represent an "edge".

I am posting an example chart, showing Dow futures (YM) in a 10min timeframe. Notice how price retraced to the 61.8%, 50% (not actually a Fib level), and 44.7% Fib lines, and then proceeded to the -61.8% line (black arrows). Does this look like a purely random price movement to you?

Attached Image (click to enlarge)
Click to Enlarge Name: YM 10min Fibs acting as support and target 20151203.jpg Size: 101 KB


Where is the logic behind these numbers? Part of the answer is that they may be a self fulfilling prophecy. But there may be a bit more to it: Fibonacci himself used his number sequence to describe the (idealised) growth of a rabbit population (wikipedia: https://en.wikipedia.org/wiki/Fibonacci_number#Origins). Fibonacci numbers are also found in nature as a pattern of ideal growth (patterns of seeds and petals in plants). More in general, the sequence describes ideal coverage of available space and resources. Something similar could be the case in financial markets, where price advances in patterns through available resources (buy and sell orders)...
  • #60
  • Feb 5, 2016 5:32am Feb 5, 2016 5:32am
Oh, and by the way, Fibos are used by the Big Boys too, either for trading themselves, or to program algos to run stops...
Big Boys ..you know the real market movers (owners), 5 Banks provide 60% of all liquidity...(you can google the exact number)...

Talking about stop runs...before one even studie fibos, indies or fundamentals, one should study stop runs (liquidity pools), the Mother of all retailer loosing
systems. ( this is how the face of a Big Boy looks, after inducing a move, letting all small boys run in, and stop running them out)...

And this is how he parties after...
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