The only way to trade with fibonacci

[1a2b3cppp]

Quote from taowave:

If I understand you correctly,you wait until a 61.8% retracement to buy your fitst lot,and add at the 50% and 38.2%%.If wrong,you liquidate at the the full retracement...And where do you sell at a profit?

I said "I exit at 100%." That's my target profit (most of the time).

If I am right how can you say you dont care and buy all of them??

Let me try to explain it again.

Fib gurus will post after the fact charts. In one of them, price retraces to 38% and they say "look! Price retraced to 38% and we bought there!!!" In another one, price retraced to 50% and they will say "look, price retraced to 50% and we bought there!"

My whole point is that ahead of time, they had NO IDEA where it was going to go. On the second chart, they didn't know that it was going to go past 38% down to 50%. And on the first chart, they had no idea it was going to reverse at 38% and not go down to 50%.

Do you know in advance that price will retrace 61.8% and then trade up to the 50% and 38% levels??

No. I don't know if it is going to reverse at 38%, or 50%, or 62%... or 27.5%, or 36.349287%, or 95.11111%, or anywhere else.

Sounds to me like you certainly care,otherwise you would average down starting at the 38% retracement down to the 68%.

I do average down starting at 38% down to 68%.

(did you mean to say "...otherwise you wouldn't average down..."?)

I would have to assume you are entering with an allocated size per level,and most likely if you are filled at all levels you are in at apx a 50% retracement...

Depending on the position sizing used, yeah, but it's usually a little bit below the 50% level.

You sound like a closet Fibber to me

Well like I said, the method posted in this thread has been modified to use fib levels (as opposed to the levels I usually use which are completely unrelated to fibs or anything else like that). I am doing it this way because I wanted to be the first person ever to post a method that uses fibs that is not vague or ambiguous at all.

 

[taowave]

I think we define 38,50 and 68% differently..

So when you say your first buy is at the 68% retracement level,that to me means price retraced 68% of the move.You then buy more at the 50% and more at the 38%.To me that meant pyramiding,not scaling in(averaging down)..But it seems that you scale into positions..

I am in complete agreement with you,and get your point..Does it really matter if we buy t 25,50,75 or 38,50,68?? Doubt it...

What i do is trade off a momentum indicator that crosses below an overbought level.I than scale in from there,but more based on recent volaility..

BTW,from what i have backtested,scaling in vs going all in is pretty much 6 of one/half dozen of another..I will say that if you are buying a 3 lots as price retraces,you may want to refine your entry..

Quote from 1a2b3cppp:

I said "I exit at 100%." That's my target profit (most of the time).



Let me try to explain it again.

Fib gurus will post after the fact charts. In one of them, price retraces to 38% and they say "look! Price retraced to 38% and we bought there!!!" In another one, price retraced to 50% and they will say "look, price retraced to 50% and we bought there!"

My whole point is that ahead of time, they had NO IDEA where it was going to go. On the second chart, they didn't know that it was going to go past 38% down to 50%. And on the first chart, they had no idea it was going to reverse at 38% and not go down to 50%.



No. I don't know if it is going to reverse at 38%, or 50%, or 62%... or 27.5%, or 36.349287%, or 95.11111%, or anywhere else.



I do average down starting at 38% down to 68%.

(did you mean to say "...otherwise you wouldn't average down..."?)



Depending on the position sizing used, yeah, but it's usually a little bit below the 50% level.



Well like I said, the method posted in this thread has been modified to use fib levels (as opposed to the levels I usually use which are completely unrelated to fibs or anything else like that). I am doing it this way because I wanted to be the first person ever to post a method that uses fibs that is not vague or ambiguous at all.

 

[1a2b3cppp]

Quote from taowave:

I think we define 38,50 and 68% differently..

So when you say your first buy is at the 68% retracement level,that to me means price retraced 68% of the move.You then buy more at the 50% and more at the 38%.To me that meant pyramiding,not scaling in(averaging down)..But it seems that you scale into positions..

Ohhhh! I get what you mean.

Yeah, I may have defined them backward before. I'm sorry.

Here:

Assume they're drawn over an uptrend:

0%
38%
50%
62%
100%

Now we're talking in percent retracement.

Based off of that, when buying retracements of an uptrend (meaning the initial diagonal line which determines the retracements was drawn from lower-left to upper-right):

First buy is at 38%
Second buy is at 50%
Third buy is at 62%
Target profit as at 0%
Stop loss is at 100%

Is that more clear?

I will say that if you are buying a 3 lots as price retraces,you may want to refine your entry..

I find that scaling in (averaging down) is necessary for people (like me) who cannot predict price direction. Trust me, if I could predict direction, my strategy and money management would be a lot different.

 

[taowave]

Yup,we are 100% on the same page..Do you trade systems as well and look at MAE??

I only brought up revisiting your entry as I assume there are many times(hopefully) that you are only 1/3 of your full position size...

Do you have a program that permits you to backtest your approach??

Where do you sell on the upside...

Quote from 1a2b3cppp:

Ohhhh! I get what you mean.

Yeah, I may have defined them backward before. I'm sorry.

Here:

Assume they're drawn over an uptrend:

0%
38%
50%
62%
100%

Now we're talking in percent retracement.

Based off of that, when buying retracements of an uptrend (meaning the initial diagonal line which determines the retracements was drawn from lower-left to upper-right):

First buy is at 38%
Second buy is at 50%
Third buy is at 62%
Target profit as at 0%
Stop loss is at 100%

Is that more clear?



I find that scaling in (averaging down) is necessary for people (like me) who cannot predict price direction. Trust me, if I could predict direction, my strategy and money management would be a lot different.

 

[1a2b3cppp]

Quote from taowave:

Yup,we are 100% on the same page..Do you trade systems as well and look at MAE??

I don't trade systems.

I only brought up revisiting your entry as I assume there are many times(hopefully) that you are only 1/3 of your full position size...

Yeah, if price only retraces to the first retracement, then I only have a small position size.

Do you have a program that permits you to backtest your approach??

No, but that would be awesome.

(Noobs: take note! Other gurus say backtesting is bad (because it reveals that their methods don't work). I say backtesting would be awesome and would love to see some!)

Where do you sell on the upside...

Not sure I understand what "upside" means.

You mean when I'm selling retracements after a down trend? Same retracement %'s.

I am a little less likely to actually short in my swing trading account, however, because I believe the market is slightly biased to go upward over time. There are exceptions, just overall, I'm a little less likely.

 

[konviction]

Quote from SomeYoungGuy:

What about the rest of the times when price retraced nowhere near a fib line, price crashed right through a fib line, or flirted with a fib line then kept right on going?

1. if price retraces no where near a fib line, then its not one thats important enough to be worried about.

2. If price crashed through a fib line..it may find support at the one under it..if price keeps going down and breaks all the levels, then tough luck. I use fibs in conjunction with price s/r which i'll show in a min...

3. flirts with a fib line then keeps going..you mean it comes up, almost touching, then goes back down?...well in either case it may be close enough to take..you cant look at fibs like a line in the sand and say "oh well it didnt touch the 50% RIGHT at such and such price so im not taking it"...cant do that.

How do you tell real time and with enough notice to make money?

Trading, no matter what the method is nothing more than an educated gamble. PERIOD..thats a FACT!. I know the OP hates fibs, but he cant argue that. If he does, he's a fool.

If you claim to use fib lines to trade, and you are successful, then fib lines have nothing to do with it. You have some other unconscious skill that you are ignoring.

You would be right

But I will be happy to believe in your tea leaves if you can show me how they make me money.

[/QUOTE]

---------------

about this chart.

From last time you saw the s/r lines I drew, now i added my fib to look for a retrace from 37 to 24. We can see now that price had retraced to the 38.2 level. If I wanted to take this retracement, my stop would be slightly above one of those light blue resistance lines by .01. Using a 3% max risk, I know that I have a good probability of making some money, because if the resistance lines I have on the chart hold up, then even if price retraced to 50 or possibly even 60%, I'll still be in the trade because the next highest resistance above my fib was 33.50 and the 61.8 was 32.38.

Now because price broke and closed below support from 26.50, I'm bearish and looking for a retrace which we did get, but as you can see, we never made a new leg down. We didnt even test the lows of 24..here I would have been stopped at b/e

now look at month of feburary 2010, price broke and closed above the last high of 29 also our 38.2..this is bullish. So even though we can see that price is now CURRENTLY trading at our previous resistance of 33, I'm probably thinking about buying than shorting at this moment..

So you can see how I use fibs WITH price... I dont just draw fibs and go, "well I hope it retraces at 38,50, or 61"... The Op doesn't know how to trade price action or read the markets, and thats a VERY critical tool when trading with fibs. Knowing fibs is just half the battle. A bad carpenter blames his tools...thats really all this thread boils down to.

 

[konviction]

For a trade long, my fib is now drawn from the swing low support of 26.54 to highs.

You can see we are in an upward channel, though not yet confirmed. We can also see that price is making higher highs, and higher lows, marked by the purple boxes

Now as far as a fib retrace goes, I'm not going to take the 38.2 most likely, because there is no price support level there to give me a reason that level should hold. However the 50 and 61 are much closer to the last swing high we had of 29 so this is a better entry. I hope that clears up some things.

KON

 

[taowave]

I was asking how far you let your profits run on the upside..

I am sure you realise that the fibs aer secondary to your approach,and you are basically making the argument that

1) Scaling in is a superior strategy

or

2) You are emotionally more comfortable with scaling in.

I would reccomend that you get a decent software package and understand MAE,ATR's and scaling in vs going all in...

You may be suprised what you find out

Quote from 1a2b3cppp:

I don't trade systems.

Yeah, if price only retraces to the first retracement, then I only have a small position size.

No, but that would be awesome.

(Noobs: take note! Other gurus say backtesting is bad (because it reveals that their methods don't work). I say backtesting would be awesome and would love to see some!)



Not sure I understand what "upside" means.

 

[TraderZones]

Quote from elit5314:

fib is a tool; if you know how to use it, it will work for you and if you dont know how to use it you can say it doesnt work. and there lies the ignorance

That is the point. Research shows Fib is useless, and there are some people who are not bothered by this. This helps us see the paper traders (elit5314).

But here is another tool for you just as useless...

 

[konviction]

here is a perfect example. RE daily chart.

9 days of up movement, broke and closed above its swing low of 82.88 ( marked by purple circle ), and now price is selling off. So...

Price broke the 38.2, but if I saw support at 38.2, my stop would be below the price support level of 82.88..again, the swing low support line, which so far is being held up.

I dont want to see price go any lower than 82.19.