Where is the logic behind applying Fibonacci to trading? | Page 10 | Forex Factory

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Where is the logic behind applying Fibonacci to trading?

  • #181
  • Feb 18, 2016 10:19am Feb 18, 2016 10:19am
Quoting GEfx
professional traders know how and when to use fibs, .
This is all I question.

Having been fortunate enough to speak to a few people directly involved in both buy and sell side trading for institutions, the market makers ... those who drive the market said that Fibs, nor any kind of TA was used at all. No sell side person I spoke to even used a chart to a significant degree...only the price. Given that his job was to offset risk, he only needed the prices relevant to his order books.

Considering Retail Fx only constitutes approximately 6% of all daily trading volumes...I fail to see how this puny amount can make any drawn level on a chart significant as a predictive tool.
Nothing said here changes that view, because there is nothing quantifiable.
Sure, i get people can use them as a reference point...but that's all it is...it has no greater or less significance than a macd, ma or anything else people spend so much time on.
Wealth comes from what you keep, not what you earn
  • #182
  • Feb 18, 2016 10:56am Feb 18, 2016 10:56am
Quoting trader34
{quote} ... those who drive the market said that Fibs, nor any kind of TA was used at all.
Of course not. As a retail traders, we are trading nearly blind. If you are a Citi or Deutsche Bank currency trader, you see more than 15 % of all orders taking place in real time (something like https://www.dailyfx.com/sentiment , just on much, much, much bigger scale). From that you can predict where price is gonna move better than any technical tool can. The only problem you have is to get enough buyers or sellers to fill your gigantic order without moving price before getting filled. Very good article about supply and demand zones (and how to recognize them) can be read at http://www.tradeciety.com/the-6-gold...ly-and-demand/
  • #183
  • Feb 18, 2016 11:07am Feb 18, 2016 11:07am
Quoting GEfx
I think a few of us have provided our logic in using fibs. I appreciate the direct comments from those who have chosen not to use fibs. But comments such as, "when the market is moving, no one cares which fibo level is being tickled" (actually, if you knew what you are talking about, you'd know that the only time you care which fib level is being "tickled" is when the market is moving), "a self-fulfilling prophecy" (no, they are not), "yes it is meaningless" (to you, but that is because you don't understand), "superstition and the desire to find...
Good post
  • #184
  • Feb 18, 2016 11:11am Feb 18, 2016 11:11am
I think there is no logic behind it, but most trader use it, even big player, So we know big player is the market maker who move the price so we retail trader use the same tool. Just it
Don't be greedy! Sooner or later it will kill you! "Droneox Dragon"
  • #185
  • Feb 18, 2016 11:13am Feb 18, 2016 11:13am
Quoting Tom81
supply and demand
It all boils down to this in my view. Whether one uses fibs or not, supply and demand, and being able to read supply and demand will elevate a person from trading (nearly) blind as you've put it, to trading with eyes wide open and seeing.
  • #186
  • Feb 18, 2016 3:59pm Feb 18, 2016 3:59pm
Quoting trader34
{quote} This is all I question. Having been fortunate enough to speak to a few people directly involved in both buy and sell side trading for institutions, the market makers ... those who drive the market said that Fibs, nor any kind of TA was used at all. No sell side person I spoke to even used a chart to a significant degree...only the price. Given that his job was to offset risk, he only needed the prices relevant to his order books. Considering Retail Fx only constitutes approximately 6% of all daily trading volumes...I fail to see how this...
Just to be clear, over the last 25 years, as a trader and a financial services consultant, I have talked to and consulted with hundreds of traders, including over 125 currency traders. Let me say it one more time, every professional trader knows when and where to use fibs, and they know where the important fibs are. In many firms, not knowing these basic numbers will likely get you fired. Now, as a retail trader, most of you don't understand the business processes and procedures used by trading firms. But as a retail trader, you can use TA tools to figure out when and what the big boys are doing, and then try to trade with them. Or, you can just sit back and be confused by the chaos and randomness -- lol. Now, I think I'm done here.
  • #187
  • Feb 19, 2016 12:15am Feb 19, 2016 12:15am
Quoting GEfx
{quote} Just to be clear, over the last 25 years, as a trader and a financial services consultant, I have talked to and consulted with hundreds of traders, including over 125 currency traders. Let me say it one more time, every professional trader knows when and where to use fibs, and they know where the important fibs are. In many firms, not knowing these basic numbers will likely get you fired. Now, as a retail trader, most of you don't understand the business processes and procedures used by trading firms. But as a retail trader, you can use...

Then I must assume that those "hundreds of traders, including over 125 currency traders." must not be doing any better than your average retail trader.
  • #188
  • Feb 19, 2016 2:49am Feb 19, 2016 2:49am
Quoting GEfx
I think a few of us have provided our logic in using fibs. I appreciate the direct comments from those who have chosen not to use fibs. But comments such as, "when the market is moving, no one cares which fibo level is being tickled" (actually, if you knew what you are talking about, you'd know that the only time you care which fib level is being "tickled" is when the market is moving), "a self-fulfilling prophecy" (no, they are not), "yes it is meaningless" (to you, but that is because you don't understand), "superstition and the desire to find...
It is superstition. Because even if someone claims he is accurately using fibs he is empirically wrong. In the retracements what actually happens is someone assuming something interesting might be happening between 1-100, or between 30 and 70. Then after the day is over, what actually happened is bent around the rules. It is like shooting an arrow at a tree then drawing the bullseye around where the arrow hit. If someone could prove the fibs had retracement points where it reversed EXACTLY on 61.8% with an error of 1% over thousands of times, then it would have some empirical proof. But adjusting that margin of error to 20% in each direction has no predictive quality.

They should not call it fibonacci retracement but fat yolo band of some dude. Because the magic reverses never happen statistically near the fibo levels.


Show me on that fib chart I posted on the other page how that 61.8% has any meaning, I dont see it.
Price-Action Extremist
  • #189
  • Feb 19, 2016 3:37am Feb 19, 2016 3:37am
Quoting bagman
Show me on that fib chart I posted on the other page how that 61.8% has any meaning, I dont see it.
Did you miss the black horizontal line that I drew, perhaps?

I'm not advocating the use of a fib tool by the way. I'd also concede that if one wanted to see an exact 61.8 retrace in accordance with the fib tool then your example would not be it, however, the logic to the turning point in your chart lies in the already present market structure to the left. To debate whether or not fibonacci underpins this logic is to a certain degree, vapid. For sure, it isn't going to make anyone a better trader. In closing I'd just like to say that the existence of the market structure to the left doesn't mean that the market will turn there on the retrace. But that's where reading price-action at these levels comes into its own.

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  • #190
  • Feb 19, 2016 3:39am Feb 19, 2016 3:39am
Quoting Mingary
{quote} Then I must assume that those "hundreds of traders, including over 125 currency traders." must not be doing any better than your average retail trader.
Must you? What the hell are you talking about? What did I say to lead you to such a conclusion?
  • #191
  • Feb 19, 2016 3:52am Feb 19, 2016 3:52am
Quoting bagman
{quote} It is superstition. Because even if someone claims he is accurately using fibs he is empirically wrong. In the retracements what actually happens is someone assuming something interesting might be happening between 1-100, or between 30 and 70. Then after the day is over, what actually happened is bent around the rules. It is like shooting an arrow at a tree then drawing the bullseye around where the arrow hit. If someone could prove the fibs had retracement points where it reversed EXACTLY on 61.8% with an error of 1% over thousands of times,...
I'm not sure what it means to accurately use fibs. I can only assume that you are not following the discussion. Is English not your primary language? I don't recall anyone saying fibs are meant to accurately do anything. And what are you talking about when you say "reverse EXACTLY on 61.8% with an error of 1%"? What predictive quality? Have you not read my posts where I have stated that fibs don't predict anything? Jeez!
  • #192
  • Feb 19, 2016 3:52am Feb 19, 2016 3:52am
Quoting Ponzi Jr
{quote} As someone studying mathematics at university, there is little I understand beyond what is logical. For that reason, I feel I should keep Fibbonacci and other 'magic' elements out of my trading. Thanks for your input though.
It would be unwise to keep Fibs out of your trading, as the market (whether you like it or not) tends to stop and reverse at key Fib levels.

As a previous poster said, this can't be all self-fulfilling prophecy as not everyone is using Fibs, so something else must be at work here. I don't pretend to know what that is, but it just works.

Maybe it really is 'magic' as stated elsewhere.

The markets are fractal in nature, no matter how far you zoom in (or out) you always see the same patterns. This must mean something?......
  • #193
  • Feb 19, 2016 3:54am Feb 19, 2016 3:54am
Quoting simond2002
{quote} Did you miss the black horizontal line that I drew, perhaps? I'm not advocating the use of a fib tool by the way. I'd also concede that if one wanted to see an exact 61.8 retrace in accordance with the fib tool then your example would not be it, however, the logic to the turning point in your chart lies in the already present market structure to the left. To debate whether or not fibonacci underpins this logic is to a certain degree, vapid. For sure, it isn't going to make anyone a better trader. In closing I'd just like to say that the...
Now I get what you mean. I think fibs are statistically wrong, because for them to be right they should call them fib bands and they have to be so wide that they cover 40-70 in this chart to have any predictive function. But 40 and 70 and just numbers that have nothing to do with fibs.
Price-Action Extremist
  • #194
  • Feb 19, 2016 3:57am Feb 19, 2016 3:57am
Quoting boxferret
{quote} It would be unwise to keep Fibs out of your trading, as the market (whether you like it or not) tends to stop and reverse at key Fib levels. As a previous poster said, this can't be all self-fulfilling prophecy as not everyone is using Fibs, so something else must be at work here. I don't pretend to know what that is, but it just works. Maybe it really is 'magic' as stated elsewhere. The markets are fractal in nature, no matter how far you zoom in (or out) you always see the same patterns. This must mean something?......
the market does not tend to do anything at fib levels. Something interesting happening in a thick band around the center of a wave does not prove fibs work. You can pick out probably 20 meaningful values in any chart from 0-100. Then selectively picking out fibs is selective perception, and on top of it they are wrong almost all the time. Wrong meaning, if it reverses at 63 or 58, then it is 63 or 58, and not fib magic because 61.8 is sort of near that.

Ponzi if you are already studying math then you are already better off because mathematical probability is a way better edge to keep you out of stupid decisions in trading. Believe in math, not fibs
Price-Action Extremist
  • #195
  • Feb 19, 2016 4:14am Feb 19, 2016 4:14am
Quoting GEfx
{quote} I'm not sure what it means to accurately use fibs. I can only assume that you are not following the discussion. Is English not your primary language? I don't recall anyone saying fibs are meant to accurately do anything. And what are you talking about when you say "reverse EXACTLY on 61.8% with an error of 1%"? What predictive quality? Have you not read my posts where I have stated that fibs don't predict anything? Jeez!
The only use of any indicator is to have predictive value. All indicators are used to predict stuff.
Price-Action Extremist
  • #196
  • Feb 19, 2016 4:20am Feb 19, 2016 4:20am
Quoting trader34
{quote} The forex market is not nature.
Thousands of humans trading worldwide IS nature!.....

The trading robots used by the big institutions are programmed by humans; nature again.

The markets reflect human nature as decisions are made by people and the machines they programme.

So I would say that fibs are everywhere in nature so we shouldn't be surprised if we find them on our charts.

As always, feel free to disagree.
  • #197
  • Feb 19, 2016 4:25am Feb 19, 2016 4:25am
Quoting bagman
{quote} the market does not tend to do anything at fib levels. Something interesting happening in a thick band around the center of a wave does not prove fibs work. You can pick out probably 20 meaningful values in any chart from 0-100. Then selectively picking out fibs is selective perception, and on top of it they are wrong almost all the time. Wrong meaning, if it reverses at 63 or 58, then it is 63 or 58, and not fib magic because 61.8 is sort of near that. Ponzi if you are already studying math then you are already better off because mathematical...
Well this is interesting..... You see nothing happening at fib levels and I do!

Maybe the whole damn thing is so subjective we just see what our experience tells us to see?
  • #198
  • Feb 19, 2016 4:34am Feb 19, 2016 4:34am
Quoting bagman
{quote} The only use of any indicator is to have predictive value. All indicators are used to predict stuff.
I think you have got it.
Prediction is defined as something that might happen in the future, not a definite event.
The more information that you have that increases the probability, the better decision that you will make.
It can be conventional or unconventional.
Fibonacci is Maths, that's where I first learnt about it, although it did crop up in Biology as well.
Think of Fibs as a ruler to measure the current & project the future, an art form not science, where everything is either yes or no.

Makes no difference to anyone else if you use Fibs or not.
It never gets easier, you just get better
  • #199
  • Feb 19, 2016 4:34am Feb 19, 2016 4:34am
Quoting boxferret
{quote} As always, feel free to disagree.
I sure do!
Wealth comes from what you keep, not what you earn
  • #200
  • Feb 19, 2016 4:36am Feb 19, 2016 4:36am
Quoting boxferret
{quote} Well this is interesting..... You see nothing happening at fib levels and I do! Maybe the whole damn thing is so subjective we just see what our experience tells us to see?
Your perception is fooling you. Would you still see interesting things exactly at 61.8 when you did not know about fibo retracement?



Attached Image (click to enlarge)
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Take a look at the fibo screenshot again I posted 2 pages before. Take a close look at the distance between the 50 and 61.8 line.

I cooked it. I took a screenshot from babypips.com, then cooked the screenshot and moved the 61.8 line up to 64. Now with that information you can clearly see that the 61.8 line is way too far above the 50 line. But no one here noticed it before. Selective perception.

If someone would hack the fibo line indicators on all major brokers and cook the numbers so the lines would be off by 3-5 points no one would notice it and people would still believe in fibs.
Price-Action Extremist
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