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Fibonacci Retracements
- Thread starter ToTrade
- Start date
233 and 610 are fib numbers! Ego likes the 610min. ma
Originally posted by stevet
fib retracement and extensions are real important
the 233 and 610 i am not too sure about, but sometimes traders find that a number near a fib number is the right level for him by experience - so 610 may just happen to relate to 618 - or it may of course relate to something i have personally not used
What fib numbers are you usually looking at? What time frames?
Edwards and Magee state that retracements in a legitimate trend stop somewhere between 1/3 and 2/3. Now form my observation that is true. BUT, how the heck are you supposed to know where between 1/3 and 2/3 it will be??? And where should you place your stop???
it's not important which fib number you are looking for. .618, .382, etc. They are all equal in that they all appear in nature and in the markets.
In nature, they appear almost perfectly. Why then should these numbers not be perfect in the stock market retracements? The answer? they are! The question is not how to fit fibonnacci to the markets, it is how do the markets express perfect fibonacci numbers. Not zones, not levels, all perfect retracements.
The fact is, every retracement is a perfect expression of fibonacci. The problem is in our perception, not in the charts expression.
In nature, they appear almost perfectly. Why then should these numbers not be perfect in the stock market retracements? The answer? they are! The question is not how to fit fibonnacci to the markets, it is how do the markets express perfect fibonacci numbers. Not zones, not levels, all perfect retracements.
The fact is, every retracement is a perfect expression of fibonacci. The problem is in our perception, not in the charts expression.
I would caution any complete newbies out there to never use fib numbers all by themselves. The same goes for candlesticks or anything else.
Originally posted by lundy
it's not important which fib number you are looking for.
They are all equal in that they all appear in nature and in the markets.
Against my better judgment I will ask. Don't ALL percentages appear in nature and the markets? If I went on a tape measure hunt for occurrences of, say, 16% in every day life, I could come up with a hundred of them. Tomorrow.
Why would I be better off believing in fib than recognizing the plain jane truth of the below obvious generalizations, which seem to get the job done just as well with no fuss or muss:
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if A retraces a smaller percentage amount than B before showing a marked decrease in velocity, this offers at least short term evidence that A contains higher relative strength than B.
A market that gives up a LOT is more likely to witness a full reversal than a market that gives up a LITTLE based on simple probability, no different than saying the farther behind a racehorse gets the more likely he is to lose the race.
Because the human eye does not give all data points equal weight and some points naturally get more weight than others, a crossing of the halfway point is likely to be significant from a mass psychology standpoint because it violates such a common eyeball marker.
Neat fractions are more aesthetically appealing and more desirable to work with than sloppy fractions. i.e. when making rule of thumb estimates, one half is more appealing than five twelfths and two thirds is more appealing than eleven sixteenths. BUT for this reason, reverse psychology suggests numbers with decimal points can sound more scientific than numbers without them purely for exotic reasons EVEN THOUGH decimal points are frequently ridiculously abused. In government stats for example. 15.7% increase sounds more precise than 15% increase, when in reality a wide band of plus or minus whole integers should probably apply.
Applying false precision to fuzziness results in false confidence. If an image is blurry, it is generally wiser to internalize that blurriness and thus assign the information value a lower grade, than to impose false clarity on the image and run the risk of making a bad assumption.
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'It's there you just don't see it' is not a good argument. In fact it is a pure assertion and NOT AN ARGUMENT AT ALL. In the words of James Brown, please, please PLEASE give me something more substantial if you can. I would LOVE to hear some of the unfounded assumptions behind fibonacci further fleshed out because I've never heard anything beyond unbacked assertion.
I'm not skeptical because I am close minded, I am skeptical because I have yet to ever hear a convincing line of reason as to why fib is more valid than the random numbers duffer don speaks of. Anything that fib tries to explain can be explained already by a simple set of clear observations.
If you don't want to give a shot at explaining fib to me, I understand. But don't call me close minded in that case, because I really am willing to listen (if there is anything to be said).
speak to me. breathe. put my skepticism on the run. it's time. trading is about money, not us and them. so enlighten me before we hit that great gig in the sky. Use any color you like, unless you've got brain damage. Or is fib having an eclipse?
Originally posted by stevet
They are far superior to any other fractional method including 33% and 66% etc, although those and other levels do also act as support and resistance.
Why?
I have a fib retracement tool on my charting software.
I view my charts close to full screen size on a 19 inch monitor (or maybe its 21 inches, I forget. Doesn't really matter much though. Hmmm).
The fib tool expands or contracts with my mouse movement. An imperceptible shift in my wrist can easily make the difference between 31.8% and 33%.
A tiny adjustment for a high or low or the end of a candle real body at the starting point can also change the adjustment by a statistically significant amount.
If technical analysis is an art and psychology and sentiment are broad concepts that require broad readings, how can you tell me there is a tool so precise that it can detect meaningful differences in tiny percentage increments?
This is what I don't get. Fib ratios may be everywhere in nature, sure, but mass psychology and market movement, ESPECIALLY short term market movement, is just too 'fuzzy' for such overly precise statements.
Look at the universe as a collective set of defined rules. Reality plays out based on the way the rules interact with each other. But nowhere is there a rule that says 'this measurement must be constantly met.' There are shades of gray, everywhere. Life into nonlife, pile into nonpile, Empire into nonempire, truth into lie. So how can you tell me you can step up to the market and pinpoint turnaround points within a three percent range (let alone a ZERO percent range)?
And what's the difference between my method for determining when a retracement is over- gaging velocity and using my past experience to determine the likely starting point of a new leg? We are both waiting for the market to tell us what's happening, I just don't pretend to have the playbook ahead of time.
Help me here