Where is the logic behind applying Fibonacci to trading? | Page 14 | Forex Factory

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Where is the logic behind applying Fibonacci to trading?

  • #261
  • Apr 9, 2016 2:38pm Apr 9, 2016 2:38pm
Quoting forexintradi
{quote} I agree with you, BUT... Eventhough Fibonacci is a nice tool, is there something in trading working all the time? And, I guess it is a major problem when you have to use the Fibonacci tool and you dont know where to place it. I mean, usually there are several trends in just one graphic, right? So, where you place the Fibo tool? The main trend price maybe is going up meanwhile a mid term price trend is coming down, and the last short trend is going up too....So often times you have a conflict to place the Fibo tool because you dont know if...

Appreciate the reply,

It is far too complex to go into details, so i do concede that fibs on their own are not reliable enough to be considered a system. You have to have extensive knowledge of EW first, then you will know where and when to run your fibs. This also is not always enough. They might be merely a reaction point rather than a complete trend change relevant to the timescale that you are observing, but used correctly, they can then become deadly accurate to pinpoint a chnage in trend. Add a 123 off of a fib level and you have a low risk/high reward high probability set-up.

In my last chart i believed the uptrend to be a complete 5w cycle, thus the most common fibs for wave B to retrace will be either 38.2%, 50% or 61.8%. A reaction in this case occured exactly at the 50% retracement. Followed by a 123, (basically minor waves 1&2 of the next 5w cycle long (wave C)

Again (imo) it doesn't get any better than that, if you can overcome the mental aspect of trading too.

Hope this helps.
GoFundMe -stage-4-glioma-brain-cancer-fighter (link in my profile)
  • #262
  • Apr 9, 2016 2:49pm Apr 9, 2016 2:49pm
Look at this chart of the Dax from a couple of weeks ago;

Attached Image (click to enlarge)
Click to Enlarge Name: Daxcount.png Size: 134 KB


Experience told me that the labeling was as shown. Tricky because it shows an irregular 'B' wave (which makes a HH). Also wave 'b' (of B) must be in 3waves, but appears to be in 5w, so it can easily cause confusion, right?

To non EW'ers this will all sound like bolox. I thought that about 10 years ago, when i first came across it.

The relevance to getting the labeling correct, is that i can then predict the markets next move, (in this case a C wave long.
This is what trading is all about - finding an 'edge' to successfully predict the next direction.

Now if i add the fib levels for wave A (start of A is 0% and top of A is 100%), now look at the reaction points (blue circles);

Attached Image (click to enlarge)
Click to Enlarge Name: daxcounta.png Size: 158 KB


The reactions at minor waves 'a' and 'c' (of overall B) are pinpoint accurate and allow a trade to be taken long thereafter.
This then makes a fresh HH, to confirm trend change, a further pullback and a small 123 to get into trend (long) with small risk and high probability.
This trade had an original 20 pip risk and went on to give 120 pips+ using a trailing stop, with the benefit that you can place a heavy trade with the knowledge or belief that it will now go up.
GoFundMe -stage-4-glioma-brain-cancer-fighter (link in my profile)
  • #263
  • Apr 9, 2016 2:51pm Apr 9, 2016 2:51pm
Quoting The Cableguy
{quote} Appreciate the reply, It is far too complex to go into details, so i do concede that fibs on their own are not reliable enough to be considered a system. You have to have extensive knowledge of EW first, then you will know where and when to run your fibs. This also is not always enough. They might be merely a reaction point rather than a complete trend change relevant to the timescale that you are observing, but used correctly, they can then become deadly accurate to pinpoint a chnage in trend. Add a 123 off of a fib level and you have a...
Thanks for your answer. I am Price Action trader, (until now a profitable one) and I donīt use Fibonacci to decide my entries, however I use it to exit (TP)...I think it is a useful tool in combination with another signals. However, it is not easy to determine what tendency the price is taking...(I use 15m graphics and sometimes it is not easy to see which is the right tendency).
I am controling the mental aspect better and better every day (I am gaining confidence in my trading due to good results).
  • #264
  • Apr 9, 2016 3:12pm Apr 9, 2016 3:12pm
Quoting The Cableguy
I find it amazing that people come on here saying 'fib's don't work, when i have shown time and time again, that they do... How the hell can you argue?! That above trade resulted in a 200 point gain, with an initial 30 point risk, which was traded in real-time. In fact, i've been around long enough to know that it is one of the best methods available combined with EW to consistently find fantastic low risk/high reward trades.
Hi Cableguy, I actually find two things amazing. First, that this silly thread is still going ... ...

Second, that you even bother trying to prove fibs are a great tool to those who can't naturally see it. I've said it before and I'll say it again,

Those who can see it do.
Those that can't don't.
Those that do will NEVER convince those that don't.
Those that don't will NEVER understand those that do.

And then of course there those who should really stick to writing proverbs, speaking nonsense in hindsight about indicators and oscillators while never showing a live trade from start to finish on a chart in their entire history here.

Stop frustrating yourself (unless you're just having fun of course ) as we know they're a great tool (not indicator) when used properly.

To the OP, I must ask. Where's the LOGIC in running all over FF asking silly questions about where's the logic behind this and that?

That's a rhetorical question of course as there is no logic in it. ....
Ghost Rider - WWTBMD?
  • #265
  • Apr 9, 2016 3:20pm Apr 9, 2016 3:20pm
Quoting albchr
{quote} Hi Cableguy, I actually find two things amazing. First, that this silly thread is still going ... ... Second, that you even bother trying to prove fibs are a great tool to those who can't naturally see it. I've said it before and I'll say it again, Those who can see it do. Those that can't don't. Those that do will NEVER convince those that don't. Those that don't will NEVER understand those that do. And then of course there those who should really stick to writing proverbs, speaking nonsense in hindsight about indicators...

Haha, i prefer the term; 'light relief' to 'having fun', but you are correct in all that you write! ) I'm not really defending it as such. It makes little difference to me if there are fibbers on board or not as it does not affect me one jot. But it's true they are an integral part to my system and probably make the difference between say 70% confidence in a set-up and maybe 90%+ if it all ties in with my wave count.
GoFundMe -stage-4-glioma-brain-cancer-fighter (link in my profile)
  • #266
  • Apr 9, 2016 3:27pm Apr 9, 2016 3:27pm
Quoting The Cableguy
{quote} Haha, i prefer the term; 'light relief' to 'having fun',
lol ... I stand corrected sir.
Ghost Rider - WWTBMD?
  • #267
  • Apr 9, 2016 4:16pm Apr 9, 2016 4:16pm
Fibonacci retracement is a great tool to use to anticipate where price may retrace to and drop again to continue a downtrend or vice versa rally from in an uptrend, but they shouldn't be relied upon to help you make an entry decision as they are not always accurate. It's a tool to help support your analysis and not a "magical entry teller" if it was as easy as just using a Fibonacci tool to find all the good entries, everyone would be successful.
  • #268
  • Apr 9, 2016 4:20pm Apr 9, 2016 4:20pm
Quoting dkrock
{quote} Oh, you are really frustrated about not having the key to my gold mine. Hmm. Now you can see why that never happened. Why would I want the distress of talking to you? YIKES! Hey, go ask Pepsi, Coca Cola, Microsoft, Apple, General Motors, Sony, or any other business for their corporate knowledge, for free, so you can use it for your personal benefit. Grow up dude.
Huh? I mentioned no names. Funny how you associated yourself with that statement. Telling, very telling.

But since you have let me ask, what good is a key to an empty gold mine? Again, that's rhetorical.

The only thing frustrating about you is the way you run around bashing everyone else when you've clearly never pulled the trigger on a live trade in your life. Keep your key dude. I'm sure you'll need it to start your moped. ....
Ghost Rider - WWTBMD?
  • #269
  • Apr 9, 2016 4:28pm Apr 9, 2016 4:28pm
Quoting dkrock
{quote} Yep, the charts certainly look good tomorrow. Sorry, I don't want to drink your kool-aid. It is okay if you have to keep fooling yourself. It is your learning curve and bank account that suffers, not mine. Guess (gamble) away. The real world determines probability using ratios between supply and demand, not some percentage of historical highs/lows. Utterly ridiculous. Can you imagine if a company determined its inventory based on a retracement level of the last time the warehouse was full? LOL. You are in denial. Just saying. Step away from...

'He who laughs last...'

I expect you'll need to google that one.

I, on the other hand, will continue to trade exactly the same way as before your advice, if you don't mind.

I think most people can suss out the do'ers to the naysayers in this world.
GoFundMe -stage-4-glioma-brain-cancer-fighter (link in my profile)
  • #270
  • Apr 9, 2016 5:05pm Apr 9, 2016 5:05pm
Awwww ... dkrock deleted all that garbage before I could even respond? Seen him do that before on other threads as well. Apparently not so sure of himself. That's cool. The only point I was going to respond to was .... follow him? I've never even heard of him prior to a couple days ago when he bashed another good guy's thread and then quickly deleted that as well. Guess you gotta be quick with the screen captures to show his true colors ... eh?

And oh, about my post count? If you notice, the vast majority of them are charts with live trades from start to finish (win, loose or draw) on my own Journal. The rest? Just talking with my many friends here. A couple more just pointing out and having fun with some Muppets as well.

Wise move below.
Attached Image

Thank you! Have a nice day
Ghost Rider - WWTBMD?
  • #271
  • Apr 9, 2016 6:34pm Apr 9, 2016 6:34pm
Quoting dkrock
I see a screenshot of the DAX a few posts back. That helps Forex traders. ? I see negativity against a guy you don't know, but you do know, but you don't know. ? I see comments from the attackers saying the Fibo is wobbly. I write posts and delete them sometimes. So many trolls write negative attacks that it just gets annoying to leave anything on FF too long. Case in point. Attack, attack, attack. Can't prove anything they say, but expect me to prove them wrong, LOL. Sure, laugh first, laugh last, cry and moan...whatever. I rarely come here because...
dkrock, I really like what you said and from it, I can tell you are very wise and positive. One who is successful or wanting to be successful carries a positive mind that sees negative opinions and comments, yet still has something positive to say back Yes, I agree with you about the Fib tool and that it should only be used as a support to your strategy and analysis and not as your decision maker.
  • #272
  • Apr 9, 2016 7:36pm Apr 9, 2016 7:36pm
Quoting dkrock
Attached is a pic of the current GBPUSD 1HR chart. Please show me which Fibo line is the next trade. Or, if EW is a real thing, and you need it, I have drawn the previous highs and lows to help you figure it out. Please identify the next entry. Perhaps for the education of others, you can also tell us how the lowest low was known before it existed. Thank you. {image}
I guess your post is address to another trader, however I am going to give my opinion based on my trading.
I trade Forex based on Price Action analysis, so my entries do it too. However I use Fibonacci in order to evaluate possible TP, and regarless it is not the only criteria I use, I have to recognize it is probably the most accurate tool to calculate retractions or extensions, so it is very usefull to me, but it is not perfect. If you know some other better tool to share, Iīll appreciate you show it to all of us here. Thank you.
  • #273
  • Apr 9, 2016 7:47pm Apr 9, 2016 7:47pm
1hr chart can be considered noise by some (including ne ), it doesn't have to show anything.
I use fibs but only in collaboration with daily weekly monthly and sometimes 4hr chart structure and only with GU.
Put fib tool on monthly chart from pre crises high to post drop low what do you see?
Put fib tool from 2014 high to 2015 low.
Another from june/july high to 2016 low. Read PA structure supp and resistance some fib extensions and go for it. If all this is too complicated for you, then you won't see the relevance. If you take a 1 dimensional single timeframe view of using fibs and expect to make money, you're better off giving your money to a charity
Come with me if you want to live....
  • #274
  • Apr 9, 2016 8:14pm Apr 9, 2016 8:14pm
Quoting Ill-b-back
1hr chart can be considered noise by some (including ne ), it doesn't have to show anything. I use fibs but only in collaboration with daily weekly monthly and sometimes 4hr chart structure and only with GU. Put fib tool on monthly chart from pre crises high to post drop low what do you see? Put fib tool from 2014 high to 2015 low. Another from june/july high to 2016 low. Read PA structure supp and resistance some fib extensions and go for it. If all this is too complicated for you, then you won't see the relevance. If you take a 1 dimensional...
So, youīd say that waiting for a retraction (price go up) it would be a good choice to enter SELLING at a price as closer as 1.4400 as possible, placing SL at 1.4550 or so, and TP at 1.3650?
  • #275
  • Apr 9, 2016 8:39pm Apr 9, 2016 8:39pm
Quoting dkrock
{quote} No offense, but I don't think the shape of a candle has much to do with knowing how to trade either. You, also, state it is a "possible" TP and not perfect. Why use something inconsistent? Stubborn? Brainwashed? Why have a TP at all? Why are you trading lines, making up TP's, and SL's? Why don't you just trade the movement of the market? It makes no sense to me. I obviously have a biased view, based on business and math knowledge, and so gamblers tend to think my facts are insults. If you are a carpenter for instance, and know how to build...
Wait, wait, wait...a minute. What are you talking about? You donīt have an idea about my trading and you dare to criticize it? I do Price Action, and I guess you donīt have a clue about it (based on your answer).
So, stop the B.S...I guess I am not the first one here thinking you are just a big mouth loser....and show us a real account to proof something what you are saying, otherwise and based on all your nonsense posts, I am done here with you!
By the way, yes I can show profitable results in a real account, so if you challenge me, I am here...show something or shut up...no offense either.
  • #276
  • Apr 9, 2016 9:25pm Apr 9, 2016 9:25pm
Quoting dkrock
{quote} As far as I know, Price Action trading is the new name for candlestick trading, since so many people lost interest in it. Is this your personal formula? Why are you being offended because I think it means nothing? Do whatever you want to do. Tell yourself it works as much as you need to. Or is it not trading the shape of a candlestick? I am talking about probability of the market. Not what happens on a single candle. I am also not attacking you personally, so why did you decide to attack me? I said I do not think the shape of a candle has...
It is like you donīt read the posts or you donīt speak English at all...have you seen in any of my posts the word ĻcandleĻeven one time? You donīt know what Price Action is about at all, but at least if you have a little bit of creativity youīd deduct Price Action could be based on the action of price, make sense to you?
Anyway, since I see you donīt read, you donīt want to learn, since it looks like you think you know everything, I am not waste my time to explain it to you, because honestly I think you donīt worth my time. So, good luck my friend...youīll need it (a lot). Bye
  • #277
  • Apr 9, 2016 9:30pm Apr 9, 2016 9:30pm
Quoting dkrock
If you are reading all these posts and wish to discuss MATH, then by all means, let's talk. If you have some kind of emotional attachment to how you make money, and your feelings are being hurt because someone knows a different way, then don't include me in your discussion. Meanwhile, if you are a Fibo trader, show me your next guess. I do not trade guesses, so I have no respect for Fibo. That is not a personal attack. It is an opinion of a mathematical formula. I have no respect for the shape or color of a candle either. So what? If you cannot...
This is my last comment to you, because again and now I am pretty sure about it, you donīt understand anything I (we) have posted here..., so did you read I relay my trading on Fibo? Have you read I base my trading on guessings?
Price Action is exactly the opposite, but no more clues to you...take the time to research and learn, because easy leassons are only given to hungry and humble people, what obviously you are not...now I am finished with you forever.
  • #278
  • Apr 9, 2016 11:15pm Apr 9, 2016 11:15pm
Quoting forexintradi
{quote} So, youd say that waiting for a retraction (price go up) it would be a good choice to enter SELLING at a price as closer as 1.4400 as possible, placing SL at 1.4550 or so, and TP at 1.3650?
you have come to that idea from my previous posts in Cable thread? I look at various fib swing high/low combos' look at support resistance, trendlines, then pay attention to daily PA. I rarely use a SL, I prefer to use smaller lot sizes instead and close out the trade at a loss if the daily close shows my analysis is wrong.the set up I am currently looking at is shorting market open targetting 1.4010. Then watch for bullish PA from 1.4/3960 area support to go long to a point not yet determined.Bigger picture? Yes I'm quite confident of 3650. I really only trade GU so can put all my attention into studying the various aspects of its structure on different timeframes
Come with me if you want to live....
  • #279
  • Apr 10, 2016 3:17am Apr 10, 2016 3:17am
Quoting albchr
{quote}

Those who can see it do.
Those that can't don't.
Those that do will NEVER convince those that don't.
Those that don't will NEVER understand those that do.
I love this quote!

Of course, it becomes futile trying to educate people and you simply have to accept the above as being spot on the money!

Before i leave this pretty pointless thread though... why trade monthly charts? Yes it's generally easier to read, but for one, a set-up is a set-up is a set-up.
In those months that it takes for a cycle to play out, i will find literally hundreds of set-ups on smaller time frames.

Attached Image (click to enlarge)
Click to Enlarge Name: dax1m29-02-16.png Size: 152 KB


That is the Dax 1 minute chart. EW suggests the move short is abc corrective. Wave C was exactly 200% of wave A.

You do not merely take a trade off of the line, because you would have to choose which to take - 100%, 161.8% 200% etc. If you can not decipher the C wave and break down into clear 5w move (using fibs to confirm waves), then at least look for another entry. Here we get a nice 123 off of the 200% extension level to get long (break of point 2 by full pip), stop below point 3 and target fresh high. Look at the R:R ratio... it's basically 1:6 all done and dusted in an hour and a half.

albchr - it was a pleasure sir.
GoFundMe -stage-4-glioma-brain-cancer-fighter (link in my profile)
  • #280
  • Apr 10, 2016 3:30am Apr 10, 2016 3:30am
Hmm fibonacci. I don't think much of those numbers but there are people out there using these levels and make money.

If you place a few random lines on the chart you will always see that if you go back and forth a little bit you will have drawn a correct support and resistance. There is a video on youtube where a person blindly drops horizontal trendlines on a chart and makes up a "valid" ta on the fly. The problem I have with fibs is that there usually are so many lines drawn on the chart that the price has to react to one of those.

Price tends to swing around. Going in waves, retracing and continuing. Without doing much empirical research it feels like the 50% retracement is much more valid than any fibonacci number. The areas between 2 fib lines can usually be great to define areas where swings will reverse but if you can also choose any other number combination as long as they are spaced out roughy evenly and cover all the regions. +-5 or 10% on these levels won't make a difference it's more about that a swing will retrace somewhere in there.
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