Swing Trading For a Consistent Return

[themickey]

What I am testing as well is ---- Will the fibs get me predominately short and protect against a large drop in the index in a major decline.

I don't believe fibs is the correct tool for this job, neither will they tell you when a new major trend will form.
Here's the problem, TA indicators tell what happened. Fibs make a guess at what has or will happen.
Fibs use a theory of a Universe set of numbers which is there sometimes in nature but unproven in events.
Fibs reminds me of the Chinese superstition in numbers, 888 etc, widely believed in the East but unproven in life.
I fail to see how fibs will foretell or warn on a large index drop.

Imo, learning the body language of price action is a better method.
Not the Al Brooks nonsense of bar by bar, more about whether mkts/sectors are bullish/bearish.

Lets take one commodity as an example, copper, do you think its governed by fibs or by supply and demand?

 

[Illini Trader]

themickey -- I appreciate your perspective and I agree 100% that the fibs will not "foretell or warn on a large index drop". We differ in that I think the Fibs are not comparable to your Chinese superstition in numbers example.

Over the last few months I have laid the Fibs on at least a thousand charts and have been blown away by first looking at a naked chart that looks pretty random -- then overlaying the Fibs and suddenly the chart has a sense of order. Based on my observations it is my belief that the core Fib levels provide a semblance of support and resistance for all charts and all time frames.

I am not trying to predict what the overall market will do as I try to look at each stock chart as an independent universe of its own unrelated to anything else. Collectively then I hope to be positioned appropriately when down cycles occur.

As far as Copper -- Yes price is governed be supply and demand. However I just looked at a Copper chart for the first time in my life and I see the Fibs giving the chart order and a measure of predictability.

 

[Illini Trader]

Continuing on ------ That is what this Test Journal will determine. Can I use the Fibs alone as a successful trading strategy.

 

[deaddog]

Once you enter a trade how are you planning on exiting? Do you have buy and sell on stop orders in the market?
How are you using the fib levels? Are you entering a trade when it hits a fib level or are you planning your exit based on fib levels from your entry price?

 

[themickey]

Over the last few months I have laid the Fibs on at least a thousand charts and have been blown away by first looking at a naked chart that looks pretty random -- then overlaying the Fibs and suddenly the chart has a sense of order.

I hear where you are coming from but there is a big "but" to the theory.
For countless previous years and before your time, traders were married to the theory of TA.
Look at any trading software and they will present you with a myriad of indicators, too numerous to mention.
Once upon a time I was enthralled with On Balance Volume Indicator OBV. I spent a few years convinced it had merit, but the halmark of a trader is they need to be honest with themselves and not be beguiled by bias. OBV works some of the time and when it doesn't work you land in deep shit due to being a hodler of a dud. (Married to conviction).
You can overlay fib and be entranced, but the bias is in hindsight. Like for example Elliot Wave, I can make the numbers fit near perfectly after the fact.
Try and trade Fibs & EW before the fact, you will 50% of the time not trade due to over analysis which leads to analysis paralysis. Then when you hit failed trades you dig a deeper hole, more analysis which leads to more analysis paralysis.

But back to indicators, years of indicators has not led to years of profitable trades for them.

 

[Illini Trader]

themickey -- Again you make some very good points and I agree 100% on the Elliot Wave. With the major waves and subwaves you can make it look like anything. You are also correct in that viewing a completed chart with the Fibs on them is one thing but making decisions in real time is yet another thing. My Fib Journal begins a work in progress so we shall see if it works for me or not on the daily charts.

One thing I did do in real time was daytrade 10 shares of AAPL for the month of December in a TOS PDA Account. I used a 1000 Tick Chart and traded on the Fibs with good results. I inserted my spreadsheet of the results (18 Days profitable and 2 losing days for $120 total profit). The Fib levels of resistance and support really worked for me and I might get back to that but right now I am searching for a way to manage larger capital that can produce a steady income without significant drawdowns. And, do it with less than an hour a day screen time. Thus this trading journal.

 

[Illini Trader]

deaddog good questions.

1. Exiting depends on the other fib levels. Does the price bar reject those levels or storm through them.

2. On this small account I do not use stops.

3. How do I use the fib levels. Let's look at thmickey's copper chart. It was in an uptrend and then started down on Feb 25th. The 61.8% retracement held confirming that the uptrend is still in play. Then it established a range between the 23.6% retracement and the 50% retracement until April 15th when it broke through the 23.6% and it was off to the races.

As themickey wisely pointed out it is easy to look at the chart after the fact and see this but the trick is to recognize it in real time and act on it.

4. I don't enter at the Fib but on rejections of Fib levels or failure of Fib levels to hold. For example when the 23.6% resistance failed on April 15th it would have been a good entry point.

 

[themickey]

Here's a tricky question for you. It's a tricky question because I want you to see something which I'll explain later, not rocket science, lots of people know this, but you may not have thought of it....
When traders place (stocks being a good example) orders which you can see on the DOM, where are the majority of orders placed in terms of price levels?

 

[easymon1]

Can I use the Fibs alone as a successful trading strategy.

LP is lifelong user of Fibs and Fibs Alone pretty much.
He was hired away from a pharma company back in the day to "just keep doing what you are doing for twenty of our clients", and he's continued to this day and hopefully many many more.
As he puts it, he is now in the "8th furlong" and has a ton of stories.

To the point, if you want to see fibs in use by an ardent devotee, Larry hosts an hour show 9:AM weekdays and archives the show to youtube.
The youtube archives are a great way to cover a lot of ground fast, condense a show using the speedbar, skip to the charts, and see tons of setups and how he uses fibs.

Weeks old shows can be looked back on and be compared to how they turned out.
Larry often provides realtime heads-ups that don't have the hindsight bias built in.
You can pull up a current chart of your own, mark it up, and check out how his "reco" did.
Larry will be the first to tell you, and often does, that "He doesn't know how any particular trade will turn out, but nobody else does either." LP takes calls on every show so call him up.
This is a random old show... cued at the NQ, Bonds, EUR, ...

Fibs can make good Support and Resistance, imho. Trading them alone?

"Trading an Engulfing Candle, Hammer at Support & Resistance provides greater conviction."
https://elitetrader.com/et/threads/...t-right-here-baby.335635/page-10#post-5014575

 

[Illini Trader]

Here's a tricky question for you. It's a tricky question because I want you to see something which I'll explain later, not rocket science, lots of people know this, but you may not have thought of it....
When traders place (stocks being a good example) orders which you can see on the DOM, where are the majority of orders placed in terms of price levels?

I have never even seriously looked at the DOM. From what I understand the people that try to trade off the order flow that they see do not have much success trying it. Also is it true that many of the orders are fake that are removed before they have a chance to fill?