Fib levels: who uses them?

[Dogballoon]

I have never found any reliability in these <i>except</i> Fib extensions -- and ONLY when measuring 50% and 100% extensions when I have a sense of where the VWAP will be for the day. Fib numbers may correspond to patterns in nature in proportions and ratios, but I do not think they have any relevance in how supply and demand, trading emotions, account growth/depletion, and price discovery functions.

In every publication I've read, even ones I find pretty sane and pragmatic, Fib retracement levels, Fib extensions, Fib time, etc. are endlessly referrenced. I would like to know who finds these tools useful and why, because it seems to me like a kind of mass mysticism that people put stock in without understanding any fundamental reason behind it.

 

[infolode]

Fibs have a place in the laws of natural order and relationships.

I don't use them in the general way most traders do.

I personally use them to figure where stops are clustered cause that's the low hanging fruit I'm after, those lovely round numbered s/r areas where blind faith puts down their money.

Aside from that I don't believe there's anything magical about them.

http://www.textism.com/bucket/fib.html

 

[sunvalley]

Like anything you have to use it in a certain way and combine with other techniques to get something more.

I have found that using Fib analysis, with an expanded set of derived numbers works. One high probability setup is to identify clusters or layers of retracements/projections in conjunction with traditional line work (trend and median lines). The more that comes together the better. This works very well on 3+ min timeframes. It identifies key areas in price but you have to consider context(higher timeframes) and price action (lower timeframes) to complete your assessment.

 

[Dogballoon]

Quote from infolode:

Fibs have a place in the laws of natural order and relationships.

I don't use them in the general way most traders do.

I personally use them to figure where stops are clustered cause that's the low hanging fruit I'm after, those lovely round numbered s/r areas where blind faith puts down their money.

Aside from that I don't believe there's anything magical about them.

http://www.textism.com/bucket/fib.html

I never believe that any technical tool works b/c other traders use them. If you use them as targets to sweep stops, that would confirm my position. I think smart traders would use any common-sense TA as low hanging fruit, and large institutions would find the liquidity it needs in common-sense TA levels.

 

[Dogballoon]

Quote from sunvalley:

Like anything you have to use it in a certain way and combine with other techniques to get something more.

I have found that using Fib analysis, with an expanded set of derived numbers works. One high probability setup is to identify clusters or layers of retracements/projections in conjunction with traditional line work (trend and median lines). The more that comes together the better. This works very well on 3+ min timeframes. It identifies key areas in price but you have to consider context(higher timeframes) and price action (lower timeframes) to complete your assessment.

So you're saying IF fib support is clustered with significant trend lines and other TA levels, it increases trader liquidity (vs. institutional order flow) enough to push price?

 

[sunvalley]

Quote from Dogballoon:

So you're saying IF fib support is clustered with significant trend lines and other TA levels, it increases trader liquidity (vs. institutional order flow) enough to push price?

No. All that I am saying is that I use fibs and they work for me. Enough said.

 

[Dogballoon]

Quote from sunvalley:

No. All that I am saying is that I use fibs and they work for me. Enough said.

Just trying to find out why people believe they work: either enough trader volume is behind it, or it reflects larger patterns in market psychology.

 

[snooptrader]

Quote from Dogballoon:

Just trying to find out why people believe they work: either enough trader volume is behind it, or it reflects larger patterns in market psychology.

They are just another form of support and resistance. If you know how to apply them, they can be accurate. Check out Trader-X's blog as he posts examples every day.

http://traderx.blogspot.com/

 

[sunvalley]

Quote from Dogballoon:

Just trying to find out why people believe they work: either enough trader volume is behind it, or it reflects larger patterns in market psychology.

I just did not want to get into a pissing contest over what each one of us believes works or not. In my case, I have found substantial evidence that the very technique I described works time and time again. Granted, the catch is that the setups are truly discretionary and you can't just take the trade without the proper context and price action. I am trading probabilities and looking for higher reward/risk ratios. Frankly, I don't really care why they work.

 

[Dogballoon]

Quote from sunvalley:

I just did not want to get into a pissing contest over what each one of us believes works or not. In my case, I have found substantial evidence that the very technique I described works time and time again. Granted, the catch is that the setups are truly discretionary and you can't just take the trade without the proper context and price action. I am trading probabilities and looking for higher reward/risk ratios. Frankly, I don't really care why they work.

I have <i>absolutely</i> no desire to get into a pissing contest. Furthermore, I believe it when some traders say they find a discretionary technique that works for them that doesn't require fundamental validation, as long as it is directly reflected in their P&L. I couldn't ever codify or explain what I find valuable in my PV analysis, and I believe the best traders intuitively understand order flow rather than repeatedly trade specific patterns.

I am simply looking for that validation for those who believe they understand it through and through. I am sorry if my question seemed antagonistic.