Where is the logic behind applying Fibonacci to trading?

This threat has become total mess. If you want to learn something serious about fibonacci levels and when/where to apply then read:

Carolyn Boroden: Fibonacci trading

Constance Brown Fibonacci analysis

there is no logic....but when a large population of traders are using it, it creates a pattern...either you follow it or you don't..

Do you believe that FOREX markets move randomly? If so, why are you here?

It doesn't take too long after one thread is finished with another one starts on the same subject.

It must be recycled every 3 months or so.

http://www.forexfactory.com/showthread.php?t=300071

The logic behind Fibonacci is that every Trader know how to use Fibonacci, so you can expect to have a response at those levels. Same applies for Harmonic Patterns.

As @ahyau says, traders creates patterns. You're in, or you're out.

As a mathematician, you're probably familiar with the terms "random walk" and "levy flight."
This exactly describes the moves of the Fx market.

The vast majority of the time, the price moves randomly. Day to day genuine transactions of actual currency exchange and small time speculation, all having the effect of small up and down movements on any chart.
A levy flight occurs when new data in the market is received and processed...tonight obviously being one of the best examples.
News, war, natural disaster etc will come into the market and this will cause a sudden shift in the bias, followed by the price moving accordingly.

Notice I said accordingly, not directionally, because as most will know, just because news seems to be negative for a currency, that currency may increase in value in the levy flight.

So, why am I here? Because I look for the levy flight. That's where I find my edge.
Years spent losing with mechanical systems in ranging markets taught me to react to price movements, not predict when they will come.

Hence my assertion that any lines drawn on a chart have no true meaning.
When the price approaches a line...there are 2 potential outcomes... a test or a break. As that video pointed out, if you draw enough lines on the charts, they will all appear to have significance at some point.
If that's the case, then is any line in any way significant? By now you know my opinion.

This market has an underlining structure that is perfectly constructed .there are far better ways of realising these laws than fibs ,i don't use them but can say that on occasion they are harmonic with structure so those that are consistently making gains using them must be aware of a deeper knowledge of the underlying structure and its laws.

The problem is the game itself,if this was a fair game reading it would be visible to most,but fair game it is not.the powers that be manipulate this structure ,it becomes a game within a game.it still has to adhere to its laws of structure only they decide how its going to be played.but there are enough periods when it is played fairly to capitalize on .the hard part is to figure out when it fair and when it is not.....

@Hanibal and @iaveight have provided the factual information about Leonardo Fibonacci and the general prevalence of Phi, 0.618 and its complementary 0.382, in human perception, nature and the mathematics of the universe.

Its important to note that the mathematician Fibonacci did not "discover" the "Fibonacci series" and associated ratios such as 0.618 and 0.382, but that he brought these concepts, and the Decimal system, to Italy during the European Enlightenment (only integers in Roman maths!) after studying mathematics in Egypt. The Arabs living in Egypt at the time did not discover this series and its ratios either, since 0.618 and 0.382 are commonly found in the proportions of the pyramids of Giza, which predate the Muslim Caliphate by at least 10,000 years. Nor did the builders of the pyramids discover or invent the Fib series and ratios, because these geometries underpin life and all manifestations of growth and decay in the universe.

As an example, musical scales are harmonic divisions that strictly adhere to Fibonacci geometry. By dividing a guitar or piano string at various Fib ratios, one produces harmonic sound. Hence, the physical division of a string according to Fib geometry produces harmonic frequencies. What is more interesting is that these frequencies are experienced by humans as "harmonic", so there is psychological resonance to sounds obtained via Fib ratios. And which came first? The physical frequencies or the psychological perception of harmony? They seem to be one and the same.

I scanned the thread to see if responses provide an answer as to why Fib geometry is used in TA, and I can provide an approximate answer (according to my understanding which is limited):

Since humans are a part of life and the universe, it follows that human endevour, including collective endevours such as markets, should exhibit the Fib series numbers and ratios that define our physical and psychological makeup. In this understanding markets are super-organisms that also exhibit Fib geometry in their structure, timing, growth and decay. This is the logic that informs the application of - and search for - Fib geometry in markets.

That there are Fib numbers and ratios at work in markets is a topic that was first written about in 1938 by Ralph Nelson Elliott in his book "The Wave Principle". His study of thousands of stock charts showed him that an initial wave of advance (wave 1) is commonly retraced to 0.618 (62%) of its total distance by wave 2. Similarly the third main wave of advance is typically retraced to 0.382 (38%) of its distance. He found these proportions to be so regular and repeatable that he proposed it as a "principle of market behavior". Subsequent empirical study seems to support his findings.

In this century, stock charts still do exhibit the geometries found by Elliott, and the field of study has become known as the Elliott Wave Principle. However, the Fib relationships evident in stock charts don't transpose note-for-note to forex and commodity charts. It doesn't mean that they can't be found in forex, commodity, sunspot, etc charts, but rather that each instrument has its own "Fib signature". For example, in the gold or bitcoin price chart its rare to find an initial advancing wave retraced to 0.618 of its length, but in the bitcoin price chart, it is very common for an advancing to extend to 1.618, 2.618 and up to 4.618 times the distance of the initial wave.

So, as some comments point out, many people are misapplying Fib geometry in market charts. Not because the ratios aren't there, but because its not one-size-fits-all. The topic of Fib geometry and its study is fascinating, since if you just draw a Fib Retracement tool across a wave high and low, there will always be a significant price reversal evident on at least one of the Fib ratio levels. This is not because its bogus, but simply because Fib geometry underpins everything. The challenge for the technical analysts is to find those Fib ratios that repeatedly manifest in certain price patterns or in specific wave positions - and they will often be unique to each instrument.

https://www.google.com.au/search?q=g...ratio+debunked

It's time to put imaginary friends and superstition aside, and grow up.

If you psycho's really believed this shit you'd apply it every day within your lives, but I'm sure you don't. I'm sure you don't drive down the street thinking about Phi all fucking day, or brush your teeth in golden spirals.

Sure, the banks really give a fuck about fibonacci - "Hey guys it's about to hit a fib level. We better print a retrace here to make sure we satisfy those Fib sycophants. No, forget that massive client order we need to fill; WE HAVE FIBS TO ENFORCE FIRST!". Ahuh. Sure.

Who mainly moves currency prices when placing positions for their clients and speculations? Larger international banks (Citi, Deutsche Bank, Barclays, JPMorgan, UBS, Bank of America, HSBC, BNP Paribas, RBS). If traders behind their desks use fibonacci levels (and according to some of the best institutional currency traders like Kathy Lien, Andrei Knight etc. they do) these levels become self-fulfilling prophecy. When this guys buy/sell the same currency at the same time, you get a strong market move. there's no magic behind these numbers, only humans with huge pockets.

So because a few assholes claim Fibs are used then you now run with that blindly? Do you also accept Jesus into your trading life? How many DON'T use fibs would be far more interesting.

Many of you have committed yourselves to elevating various tools to absurd levels of worship. If you can provide some sort of data that suggests that a significant portion of big money uses fibs then that would be something.

In the meantime all I hear is a tonne of confirmation bias. https://futures.io/traders-hideout/7...ne-theory.html

Nice tone. Carry on like that and someone with the say-so might moderate your post.

I suspect you might not have read my post just before your's prior to responding. However, even if you did, I don't take offense because I'm not the Guardian of Fibonacci Geometry. Here's a reasonable response.

Surely it would be extremistic to say that every market move and every event in the galaxy has something to do with Phi.

Similarly, saying that there is no Fib geometry at work is an extreme statement too because there are empirical studies based on hundreds of thousands of market charts that show otherwise. But those studies don't pretend to say Fib relationships occur 100% of the time in 100% of phenomena. The point is that it is a tendency that is sometimes nearer the mark and at other times way off.

As I said in my previous post, each instrument has its own tendency to manifest Fib ratios in certain price patterns or in certain wave positions. The analyst must find those through diligent chart study - or will uncover them by accident - and then use them in conjunction with other tools and pieces of information. It's not a silver bullet or holy grail, but when you find a reliable and repeating ratio for an instrument, it assists targeting, facilitates risk control, and adds to profit.

If you don't like it (Fibonacci geometry study), leave it aside. No sweat.

I've heard bank traders say that their trading day is so hectic that they just don't have the time to sit down with a Fib tool and measure and analyse. They just try to memorize which client needs which order filled and try to maintain a mental supply and demand scape and then place their own (bank) trades in the dominant direction of money flow.

Yet, their use or non-use of Fib tools is not the point - and probably has no bearing on the outcome. The point is that their human psychology is calibrated in Fib ratios, so whatever they do their actions will tend toward Fib ratios in the charts: how much they choose to put in a trade, at which level in the chart they feel it is appropriate to place a large order. All these things are disparate, yes, but in the end they tend toward Fib ratios. Not by design, but by default.

In the simplest sense: The human mind doesn't need a Fib tool to autonomously act at Fib levels.

You think that's any concern to me? Seriously, take a step back into the real world where shit matters - not this garbage.


I've had the misfortune of skimming it twice now, and I was doubly disappointed the second time. You, and others like you, take a pine cone and a flower petal, see that it spirals and yadda yadda HEY EVERYONE LIFE IS BASED ON FIBONACCI... just... just BECAUSE! You make stunning leaps to conclusions based on observations of certain things that happen to exhibit traits resembling the fib sequence. So... fucking... what?

It's a long way to go to determine that the recreational sex lives of rabbits mixed with flower petals = the markets are underpinned by this mystical - no, "devine", ratio.


Which is to say that you can specifically target the dumb assholes with too much money who do spend their days trading based on Fibs? If so, then great, and I mean that. Target those trades every single time, but "the market" does what it does, and to suggest as some here would that there is mystical or inherent design behind the movement of charts based around any particular number...

Why aren't we discussing Gann if that's the case! Why not astrology? Why not any other far-fetched nonsense that can be finagled to seem to match some hocus-pocus theory about the meaning of the universe?

Some of you, I swear, don't realize that you can give the worst combination of garbage known to man as a trading indicator and some dumb asshole somewhere will make money from it. That's just survivorship bias. Someone is winning big somewhere just flipping coins, and another by waiting for red cars to pass their window while they are watching Judge Judy on a Thursday.

So what?

Again, if you can target the times when some clown with too much money has traced a fib tool across their charts and decided to base a trade that moves the market some distance then great. That's you targeting some fucking moron, not basing trades on the mystical nature of Phi and markets.

Some asshole somewhere spins around 3 times, pats his head 5 times, and slaps his knees 2 times, and then wins every trade. Good for him, but what an absolute joke. You don't model the rest of the market based on his stupid as fuck superstition.

The echo-chamber in here is deafening sometimes.

That is complete nonsense. Selective perception.

Price responding to fibs during the Dax fall from Tuesday this week. As you can see, they work. This just one example - price responds to fib levels every minute of every hour of every day.

Does not look like it. The yellow line at 9.560 is much farther away than on the previous. This is selective perception at work.

Minor is not a king, he is a wanker, his methods do not work tha'ts why he teaches. He is unable to show a trading account showing he is profitable, claiming its confidential. His belief in wave analysis is nothing short of a crock of sh**. He might think he has something he is totally wrong. I know I bought his books and course and his platform. Studied it for three years as did two friends, both are now working in day jobs. I was the only one that carried on through those failure to what I am now which is 8 years wiser and able to predict in time and price to the bar when a market will turn.

Minor is totally wrong, he does not understand the reason behind a markets movements and he sure as hell does not understand how price works. I am one of the few people on this forum that make accurate calls on the market down to the day a market will turn and how far it will go, here is a post I made in December on my outlook on the world stock markets posted on this forum:
http://www.forexfactory.com/news.php...83#post8664501

If fib is so good lets see someome predict a price and time turn before the fact. Put this matter to bed once and forall.