Practicality of Fibonacci Retracements

[Pa(b)st Prime]

Quote from Thunderdog:

No thank you. I only trade using a 1-minute time frame. I don't believe in magical ratios, least of all those to the 3rd or so decimal point. As for looking at other time frames for confirmation, you will always be able to find something or other if you look hard enough at enough different time frames, regardless of the direction you are trading in. If you don't believe me, select a random ratio or retracement level and see for yourself.

Here's the rub T-Dog. The market i.e. her participants, don't care about your timeframe.

Would you not agree that markets ultimately re-value based on the actions of longer time frame term participants?

Short term shit is well...shit.

A single large cap component turning bid on size can "ramp" ES up a point in a nano second. Does anyone believe that an indicator on a 1min. can anticipate such a random, meaningless micro event? I don't.

If your having success with a method it's not me to criticize. But to me the single biggest indictment of indicator usefulness is the fact that they're timeframe dependant.

 

[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...

 

[Landis82]

Quote from jasonbraswell:

I'm with Thunderdog

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.

 

[jasonbraswell]

I've seen a lot of floor traders try to trade the screen based upon their technicals and fail.

I think what happen is a trader makes a lot of money on the floor one day, based upon his knowledge of paper orders coming into the ring, and later he looks at a chart. "Wow, there's a Fib right where I bought. Fibs rule!"

Of course, he doesn't even look at the Fibs that get blasted through. Hence, he has a skewed perception of the statistics.

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.

 

[Thunderdog]

Quote from Pa(b)st Prime:

Here's the rub T-Dog. The market i.e. her participants, don't care about your timeframe.

Would you not agree that markets ultimately re-value based on the actions of longer time frame term participants?

Short term shit is well...shit.

A single large cap component turning bid on size can "ramp" ES up a point in a nano second. Does anyone believe that an indicator on a 1min. can anticipate such a random, meaningless micro event? I don't.

If your having success with a method it's not me to criticize. But to me the single biggest indictment of indicator usefulness is the fact that they're timeframe dependant.

Indeed, only I care about my own time frame. Therefore, how markets "ultimately revalue" in longer time frames is beyond the scope of my own reference points and mental protective stops. And I do not use indicators. (I had tested and tried a few over the years but did not uncover any net benefit, only cost.)

Fibonacci numbers are just a mind game as near as I can figure. At least in a trading context. I'm guessing that people who trade successfully and use these numbers would be just as successful without them. And the same goes for the not-so-successful traders. As I suggested to a prior poster in this thread, pick a random retracement ratio or level, and then go time frame hunting. You'll be sure to find one that fits.

 

[osorico]

Quote from Bernoulli:

I only use fibonacci ratios in my trading. My method is to reverse any retracements that fall between .382 and .786. Works every time.

Anytime I see or hear about a 100% anything (ie. works every time) regarding the markets, credibility of the messenger is reduced to near nothing.

Not picking a fight, just voicing my opinion.
Osorico

 

[Pa(b)st Prime]

Quote from jasonbraswell:

Of course, he doesn't even look at the Fibs that get blasted through. Hence, he has a skewed perception of the statistics.

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

I look for levels that are important.

I care little if they "hold" or not. Prices change. I don't expect S/R to contain markets indefinitely.

If an S/R level is truly valid it will facilitate very little trade under/over once it's violated.

When I examine fibs I care as much about the follow through if penetrated as I do about if it "held."

 

[Pa(b)st Prime]

Thank's for the clarification. I do think though that fibs provide more meaningful levels than random.

I always enjoy your well articulated insights T. Even when I'm not completely in agreement. You're a bright guy......

Quote from Thunderdog:

Indeed, only I care about my own time frame. Therefore, how markets "ultimately revalue" in longer time frames is beyond the scope of my own reference points and mental protective stops. And I do not use indicators. (I had tested and tried a few over the years but did not uncover any net benefit, only cost.)

Fibonacci numbers are just a mind game as near as I can figure. At least in a trading context. I'm guessing that people who trade successfully and use these numbers would be just as successful without them. And the same goes for the not-so-successful traders. As I suggested to a prior poster in this thread, pick a random retracement ratio or level, and then go time frame hunting. You'll be sure to find one that fits.

 

[bjohn]

Sometimes, the fact that a price does NOT get held up at a fibonacci level can be an indication. I have no idea why prices would obey prices related to the fibonacci series, but they do. I don't know why the series shows up in nature so much either, but it does. Fibonacci levels are also related to the 'golden mean', which is also showing up in nature everywhere; in music, for example, in snail shells, in chaotic systems (like the stock market), etc.

Weird, but true. Not that, like a lot of people have said, you can just enter a trade in full faith that the price will bounce off of the .382. But, you can't put that level of faith in ANY indicator. Prices behave chaotically, so anything that helps adds to your advantage. This is my opinion.

 

[Thunderdog]

Quote from Pa(b)st Prime:

Thank's for the clarification. I do think though that fibs provide more meaningful levels than random.

I always enjoy your well articulated insights T. Even when I'm not completely in agreement. You're a bright guy......

Fair enough, and thanks for the kind words.