Just to clarify --- 50% retracement is not a Fib number but as you say most people who use Fibs do include the 50% because so many people do look at it. Rejection of a Fib number (or 50%) is a great way to reenter a trend in process.
Fibs don't work
- Thread starter SunTrader
- Start date
To clarify further - again. 61.8% is not a fib number, it is a fib ratio.
0,1,1,2,3,5,8 are fib numbers
And disagree that 50% is a not fib ratio, for anyone who uses 23.6%, 38.2%, 78.6%, 261.8%, 423.6% and a few others. They are all derived (including 50%) by dividing, multiplying or subtracting the original fib ratios 61.8% and 161.8%
In the case of 50% in particular (61.8%+38.2%)/2
I have been researching fibs quite a bit recently and suspect that they provide, more than anything else, confidence to the trader who employs them. So for example, When you see something like a Gartley that hits the ratios just right you are triggered to enter (and do so with confidence). Of course that is no guarantee it will do what you want...and how one manages the trade afterwards is what separates the masters from the neophytes...but I still think having that initial confidence is important.
@SunTrader , (forgive me for not reading the entire thread yet), but how often do you get a "perfect" setup, i.e. the fibs hit just right and you are triggered to enter? for example...I see a bunch of Garley or 3-drive Like patterns...but very rarely one that hits the exact fib ratios.
@SunTrader , (forgive me for not reading the entire thread yet), but how often do you get a "perfect" setup, i.e. the fibs hit just right and you are triggered to enter? for example...I see a bunch of Garley or 3-drive Like patterns...but very rarely one that hits the exact fib ratios.
You are absolutely correct in that the percentages are ratios of actual Fib numbers. But using ratios of the resulting percentages? Well, doing that you could make a lot of numbers into a Fib retracement percentage. No Big Deal as it is whatever we want to call it.
Since you have not read the whole thread yet, I will chime in here. You do not trade the fib as it hits it, you only trade once it reverses and rejects a particular Fib area. You also can use the failure of a Fib area as an entry in the direction of the counter trend. It is how it all fits into the rest of your trading plan.
Fibs can make sense of a seemingly choppy market. For example it is not unusual for a chop to trade between the 38.6% retrace and the 61.8% retrace, continually rejecting those levels.
You say it's not unusual but is it more likely than say...41% or 64%? Is there something magical about fibs in the way markets move?
You are correct --- the actual fib line is an area although it is not surprising to see it reverse exactly on the precise number. That is what this thread is about. Are Fibs natural to markets like they are found in nature? Some think so like suntrader and i do, but most on ET think it is just hogwash.