Practicality of Fibonacci Retracements

[ProfLogic]

Quote from Landis82:

I'm not.

As a former stock-index futures floor trader, I can tell you that "fibs" are used extensively by the pit traders.

Enough said.

I wonder if there is any correlation to that and why there will be no more pit traders in 10 years?

Humans have human quirks and idiosyncrasies . . . markets just oscillate.

 

[jessop]

382 means something to me - but this was backed up by two separate 'confluence' reasons to go Long in the ES

 

[phillyflipper]

Quote from MKTrader:

From the July low to Feb high is almost a perfect 38.2% retracement (1370) on S&P 500 so far. Yes, it dropped a few points below so far today, but this is never a 100% science.

FWIW, I tend to think Fibonacci is mostly (or maybe completely) a self-fulfilling prophecy. But when you have a popular Fib retracement at a double bottom with divergence on every momentum indicator with lower volume for the second dip in the selloff then...

The reason they work is because of the psychology involved and all the different people involved. These ratios are a part of every person because they exist in the universe. They are part of the universal truth of everything. We use them because it is the natural order of things...like breathing

 

[bjohn]

Quote from ProfLogic:

I wonder if there is any correlation to that and why there will be no more pit traders in 10 years?

Humans have human quirks and idiosyncrasies . . . markets just oscillate.

I know it seems weird, but there is something called chaos theory. You can't just dismiss something as nonsense just because you don't fully understand it.

 

[Bernoulli]

Quote from bjohn:

I know it seems weird, but there is something called chaos theory. You can't just dismiss something as nonsense just because you don't fully understand it.

Chaos theory? -- nice non sequitur.

 

[jasonbraswell]

Quote from Pa(b)st Prime:

Don't you find "blasted through" valuable information?

You took me too literally. Price stops "close" to Fib levels sometimes; other times it blasts through them; other times it meanders through them; other times it blast through and then meanders back across, etc.

As far as its role in nature, this is overblown, too.

http://www.maa.org/devlin/devlin_06_04.html

 

[cashmoney69]

Raul, how do you view the 50% retracement?... what goes through your head when the stock, or contract reaches that point?

 

[Raul641]

Cashmoney -

This is precisely what I'm trying to figure out - how to view retracements at a given level and in a given situation. On some charts, at some points, 50% (or any other Fib level) seems to be highly significant. In other situations, a given level seems to have no bearing on price action.

Right now, I can't see any way to distinguish the two, except retroactively, so I started this thread looking for some insight. I haven't read much about Fibonacci levels specifically, I've only seen them in charting packages and heard other traders talking about them.

Does anyone else have pointers to good books or articles on the subject that introduce someone with no prior knowledge to the topic of Fibonacci retracements?

Thanks for all the replies so far, it's a very interesting discussion..

Cheers,
R

 

[MKTrader]

Actually, 50% isn't a Fibonacci level. Just a popular retracement that's been added to most Fibonacci tools. I believe W.D. Gann first talked about it.

As for which levels, I don't know any secrets, but the I alluded to confirmations in my earlier post. If there's a reversal chart/candlestick pattern, if the long-term trend is in your favor, if there's divergence with momentum indicators, etc., then it's always a plus. Also, the main levels seem to be 38% and 61%. The 23.6% doesn't seem as important. If you get into the Gartley type patterns, then there are other levels to watch as well.

Quote from Raul641:

Cashmoney -

This is precisely what I'm trying to figure out - how to view retracements at a given level and in a given situation. On some charts, at some points, 50% (or any other Fib level) seems to be highly significant. In other situations, a given level seems to have no bearing on price action.

Right now, I can't see any way to distinguish the two, except retroactively, so I started this thread looking for some insight. I haven't read much about Fibonacci levels specifically, I've only seen them in charting packages and heard other traders talking about them.

Does anyone else have pointers to good books or articles on the subject that introduce someone with no prior knowledge to the topic of Fibonacci retracements?

Thanks for all the replies so far, it's a very interesting discussion..

Cheers,
R

 

[phillyflipper]

Quote from Raul641:



.

Does anyone else have pointers to good books or articles on the subject that introduce someone with no prior knowledge to the topic of Fibonacci retracements?

Thanks for all the replies so far, it's a very interesting discussion..

Cheers,
R [/B]

Raul, Trader's Press has some books on the subject. I do not work for them, but I have purchased books from them.

My offer still stands for anyone on this board. I will discuss what I have learned about Fibs. No strings attached. If you leave your number in my mail box i will call you. US and Canada only
Ron