Practicality of Fibonacci Retracements

[Landis82]

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.

Sorry, but I really don't see the "logic" in your post.

On one hand, you imply that there might be a correlation between no longer having any pit traders on the floor anymore with that of fibonacci relationships . . . but on the otherhand you then provide that humans have quirks and idiosyncrasies in contrast to markets that just oscillate.

Last time I checked, HUMANS are the ones that cause markets to oscillate, or were you not able to make that connection?

 

[Landis82]

Quote from phillyflipper:

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

Given what I have observed over the past 25 years trading the markets, I would tend to agree with the above statement.
Well said.

Check this weblink to see how Fibonacci numbers appear in nature . . . Perhaps the most popular example of this can be seen in the spiral ratios that are found in a cross-section of a Nautilus sea shell. The ratio of the spiral at 1.618 occurs tiime after time in nature.


http://www.mcs.surrey.ac.uk/Personal/R.Knott/Fibonacci/fibnat.html

 

[ProfLogic]

Quote from Landis82:

Sorry, but I really don't see the "logic" in your post.

On one hand, you imply that there might be a correlation between no longer having any pit traders on the floor anymore with that of fibonacci relationships . . . but on the otherhand you then provide that humans have quirks and idiosyncrasies in contrast to markets that just oscillate.

Last time I checked, HUMANS are the ones that cause markets to oscillate, or were you not able to make that connection?

My reply to your statement was a comment and a poor stab at dry humor, I admit. Not a slice at your intelligence as yours.

My point is, that yes, humans are the catalyst for the markets oscillating but the result can be viewed in different ways. Up to this point traders have used all kinds of means to "guess" at the direction price will go at any point in time.

Thunderdog touched on it but you could pick any set of random and sequential ratios and get the same results as Fib numbers/retracements. You don't want to believe that but if you did the work necessary to prove it you would see the results for yourself. I could sit here till I'm blue in the face arguing the point but unless you see it for yourself you would never believe it.

Consistency in the way price moves comes from it's oscillations not some set of ratios applied to those oscillations. Fib numbers and ratios are a beauty to behold when they work and just another indicator when they don't.

Ever wonder why the electronic markets are less "Noisy" than the pit traded markets? More traders need to get their information from the markets and their own intelligence other than books.

 

[phillyflipper]

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.

Do you hear yourself?? Humans ARE the market. You act as though the market is a machine. If makets oscillate it is becaause these same humans loke you make it oscillate and it does so in ratios to prior movement...it is the way it has to be
because we are humans.

 

[phillyflipper]

here we are again at the .382 retracement on the ER.
This is a daily chart and all good technicians know that the longer time frames are strong. We went through .382 to the upside then came back down and now we are testing it again.

The .382 is not the greatest Fib for reversal signals UNLESS
the move to the downside was very strong which it was. Now NO ONe can tell what tomorrow will bring, but i will tell you that if we can not get above this retracement or stay above it, then the
ER Will fall. In after hours we are below this level.

Good trading tomorrow to all

Ron

 

[sunvalley]

Quote from phillyflipper:

here we are again at the .382 retracement on the ER.
This is a daily chart and all good technicians know that the longer time frames are strong. We went through .382 to the upside then came back down and now we are testing it again.

The .382 is not the greatest Fib for reversal signals UNLESS
the move to the downside was very strong which it was. Now NO ONe can tell what tomorrow will bring, but i will tell you that if we can not get above this retracement or stay above it, then the
ER Will fall. In after hours we are below this level.

Good trading tomorrow to all

Ron

What is significant in this case is that it hit the .786 retracement from the low yesterday and sold off hard. Of course there is other line work that identifies this area having significant resistance. It should be an interesting overnight session and opening tomorrow.

 

[ProfLogic]

Quote from phillyflipper:

Do you hear yourself?? Humans ARE the market. You act as though the market is a machine. If makets oscillate it is becaause these same humans loke you make it oscillate and it does so in ratios to prior movement...it is the way it has to be
because we are humans.

I guess the statement I made directly above your post has made my point.

 

[phillyflipper]

Quote from sunvalley:

What is significant in this case is that it hit the .786 retracement from the low yesterday and sold off hard. Of course there is other line work that identifies this area having significant resistance. It should be an interesting overnight session and opening tomorrow.

Sun you are correct. the Fibs are everywhere in all time frames and all swing highs to lows. Fibs here there and everywhere.

 

[Bernoulli]

It is because fibs are here, there and everywhere that they have an uncanny ability to mark reversal points.

 

[squall]

Quote from Bernoulli:

It is because fibs are here, there and everywhere that they have an uncanny ability to mark reversal points.

I dont think it's anything magical...but you can look on the chart and see retracements/reversal at fib levels plenty often to consider them high enough probability to trade on. No one knows where the market is going, we all agree on that I think...And since, trading is based on probabilities, etc....it makes sense to base trades on something you have observed (such as fibonacci levels) that seem to indicate a good chance of a reversal....

Isnt that the old truism? You can be right less than 50% of the time and make money with good money management.......fibs seem to work at least this well.....Don't know why the hell they work...but they work enough to get my attention and place bets on them.