Fibs don't work

[speedo]

So the dynamics and the price of auctions will be accomplished by the dictates of geometry, astrology, including the moon phases? Sure there are cycles in the market but to extrapolate them to precision market price is a bit of a stretch. LOL. There are too many variables and unknowns. Even variables not yet considered. Then there are the absolute unknowable variables. To say that these unknown things are governed by well …..geometry and astrology is IMO an attempt at dictate to the market what it must or should do. Of course, that will not work.

There are only possibilities and probabilities of possibilities as to what the market will or may do. While manipulation to some degree can happen even total manipulation cannot be effected because even the manipulators do not know all the variables.

IMO the best thing to do is have a strategy that is quickly adaptable to what the market IS doing. And since it does have inertia the more recent things it HAS done can be a factor in assigning probability to a possibility. It is important to remember the market can go up or down. Stall or goes sideways. We can only observe and act upon that observation. All our lines drawn may help us “see” a little clearer what is presently happening but that does not mean it WILL continue to happen. There are simply too many possibilities and variables that the best we can do is try to see the complete picture and arrive at a probable possibility based upon in part, inertia. Ever ponder why the market burst through fib lines, (which I don’t use) trendlines (which I do use) and other such things? Ever wonder why one PB evolves into the resumption of the previous trend and another PB, in a similiar scenario, in terms of context and size, evolves instead into a reversal of the previous trend? A factor to understanding this phenomena is being skillful in reading the “pressures” enacted in the more recent past bars. Two entry setups can look almost identical but behave differently. Price tends to move along the line of least resistance. Hence inertia is born. And there can be no inertia without force or pressure.

In short, anything can happen. Fortunately by understanding price behavior, we can determine what is more likely to happen given defined technical conditions.

 

[Illini Trader]

I want to take a look at 3 Fib charts based on Friday's ES action. Some people say cherry picking but as I look at the chart these three are about the only possible Fibs that could be drawn because the market action was either in a strong uptrend or flat. Here is the first one based on the early pre-market low. The rejection of the 23.6% provided an entry to enjoy the rest of the day.

 

[Illini Trader]

Here is the 2nd one. This time the Fib is drawn starting at the low at about the Cash Market opening. Strangely it shows the same entry point but at the 38.2% level based on a new starting point. How about that! The same point worked on both fib drawings but at a the next fib level down.

 

[Illini Trader]

The final chart I find amazing and it is drawn from the swing low entry point to the interim high. The market moved down and churned flat for hours but the new 38.2% retrace acted as a support level for hours before the final run-up.

 

[Illini Trader]

And one more chart. After the final upmove started it offered one more chance to get in at the 23.6% retracement. See Chart below

 

[Illini Trader]

Fibs may not be perfect but they sure appear to be more than random lines on a chart.

 

[SunTrader]

Sorry but I don't see single fib lines (especially 23.5% or 78.6%) as creating support. Just don't.

 

[Illini Trader]

Sorry but I don't see single fib lines (especially 23.5% or 78.6%) as creating support. Just don'

Well, I guess you need new glasses.

 

[SunTrader]

Well I was going to post a chart backing up your first chart but I guess I'll go for an eye exam instead.

 

[NoahA]

I want to take a look at 3 Fib charts based on Friday's ES action.

Honestly, there is too much bias in these examples. Its super easy to do this on a day where price just goes straight up. Of course if you have 3 fibs to choose from, the 23, 38, 50, one of them will hit nicely for a retracement entry. When doing this on a non trading day, the results will be far, far worse. Also, you're picking swing point that you know are the tops or bottoms, but in real time, you don't know this.

Let me provide a counter example. Because we don't know about this being a super trend, shouldn't we assume that we also need to look for counter-trend trades? After the high at 4126, we put in lower high and lower lows, so it makes sense that it could be rolling over now.
If we use the hindsight low at 4108 and draw our fib to join the downside, we see that the 23, 38, 50, 61.8, they all fail to act as a good short entry. Sure you can question why short in a strong trend, but most days do not trend like this, where it takes off from the open and never looks back. I would say this type of day is less than 10% of the days. The trend are never as clean.

Furthermore, lets not forget that the low at 4108 is quite hindsight. In real time, perhaps we could have thought that the prior low at about 4113 looked like a low to use for our fib. Out chart would look like this below. Its zoomed in so we can see it well. Maybe this is too fast of a chart to use for fibs, but we see that its only the 50% level that gives a precise entry. The 23 and 38 fail.

So my point is that anytime you say look, the 50% worked, it means that the 23 and 38 failed. You pointed out many times how the 23 worked in your example, so that means you're always going to take the 23, but naturally this has to fail in order to get to the 38, 50 and 61.8.

So when you add up all the failures along the way, and all the different swing points you can use, do you really have a statistically valid system that will provide entries on all types of days? This day once again was exceptional since it was a relentless trend all day.