Though my present method calls for no "use" of Fibonacci #'s so I haven't used them per say, in over 4 years, I must say that for the prior 7 years I found them occurring with extreme frequency (within 2 or less points) of actual SP 500 areas of support/resistance, intraday reversals (bounces) and certainly "fit" into the vast majority of Elliott wave patterns.
But as with all patterns - the viewer is a critical factor - we don't always see what "is", but what we expect it see. It is a know fact in sciewntific research that it is almost, if not completely, impossible to test anything without the test or testor having some effect on the thing being tested or studied.
A weakness for me was interpreting early enough, what pattern was actually unfolding until certain criterion were met - as at the time I was too impatient to handle the larger swings (drawdowns) required to "let" the pattern unfold.
For some time I subscribed to Elliott wave, and although picking future directions and predicting collapses way ahead of seeing the larger wave structures completely develop, in my opinion was foolish and some egotistical attempt to prove something.
However, I'll never forget the newsletter of either September or October 1987. It DID, in detail, describe the upcoming October crash. I don't recall the issue as I don't recall if issues were released at the beginning or end of the month -
As part of the newsletter, there was the primary interpretation - "bullish market", then there were a couple of "alternate" wave interpretations described on the last page.
On Friday's open, October 16, 1987 I bought OEX puts one strike below the current level believing that the we were siting on the preface described in one of those "alternate" interpretations, and if correct, it was the day I'd been waiting for, for a long time.
A Friday expiration where just out the money premiums would be at their lowest, and potential, therefore, greatest. Plus no waiting around to see the outcome - great for impatient me.
I started Friday with just under $7,000, willing to risk half, by the close I had over 32,000, rolled into next cycle - very overpriced I thought at a 16 premium (remember when the furture had positive premium to the cash- and exited Monday with 64,000 - had much more but my broker kept saying he couldn't get quote and fill info - get out - it's going to bounce, etc, so I got out.
MY problem was I tried applying these patterns in the options market where direction is important, but emotion and time of entry are equally or possibly more important, and I exercised poor management by going for the long shots - short term out the money big hits. My the majority were winners, but I let them "ride the wave" looking for more - but wave move up and down, and time keeps passing - so priums deminished and i road most positions to exit as losers, still most often after they expired they "would have been winners - had I bouth another cycle out, or took my profits along the way - learned all about the "greed" factor the hard way..
That lead me to the method of SP futures trading I use today.
It works on a 5-min chart, trades average 28 mins, drawdowns intraday average under 5 points (range 0 to 10), profits average more than anyone here would believe, and best of all it's simple. And using fixed exit targets elimated the greed factor - do I catch tops and bottoms of a move - by accident maybe 1 in maybe 75 or 100 times - don't keep count - but who cares (actually some part of me does - but he'll have to just tolerate me, he can't run me any more.
Though Fib, Elliott, Gann, etc. played no conscious design part in the evolution of the method, having had knowledge of them may have helped me "see" the patterns I now use.
Once in a while when I get a trade signal that my mind "doubts" is realistic in "this" market, I even weaken for a moment and throw Fib lines on the day's extremes to see if it makes sense within those - most often it does and that makes me feel a little "safer" taking the trade - I take the trade either way, but as much as I work to keep my "mind" out of my trading it creeps in sometimes and needs a little pampering.
I must admit the surprise when I find 5 out of 6 times I do this my system target and the Fib numbers are within 1.00 to 1.25 of each other.
Again, I may only do this 2-3 times a week or less as time passes, and average 40 trades weekly, so statistically this is of no significance, but still I find it "interestingly repetitive".
Sometime I think my current method works so well because it gives no attention to what people may be thinking, what the world appears to be doing, it only responds to what the price is doing now in relation to the prior 10 to maybe 60 minutes at most.
Where it will outside of the next 6 to 8 point range (3 to either way) is of absolutely no concern to me or the method. When this trade ends, it's just a matte of awaiting the next signal, buy or sell, it's no matter, it just is going on NOW.
Statistically, averaging better than 8 trades a day, I'm not more than 25 minutes from the next trade as the last trade took on average 20+ minutes. So this handled my lack of patience.
I guess that's why I found the trading "diet" I can live with - fits my personality, avoiding large setbacks (fear), neutralizing greed, and satisfying my need for relatively immediate results.
For me ithis also raises the question of why Trend Lines work so well (again not part of my method) - just an unavoidable observation after seeing charts daily for so many years, Is there some magic that make prices follow a line, or are there enough people who "believe" that prices move along a line and set their buy and sells accordingly.
Somewhere I read: "A lie told often enough, becomes a belief, and finally a truth."
Good trading to all
ETRDR
But as with all patterns - the viewer is a critical factor - we don't always see what "is", but what we expect it see. It is a know fact in sciewntific research that it is almost, if not completely, impossible to test anything without the test or testor having some effect on the thing being tested or studied.
A weakness for me was interpreting early enough, what pattern was actually unfolding until certain criterion were met - as at the time I was too impatient to handle the larger swings (drawdowns) required to "let" the pattern unfold.
For some time I subscribed to Elliott wave, and although picking future directions and predicting collapses way ahead of seeing the larger wave structures completely develop, in my opinion was foolish and some egotistical attempt to prove something.
However, I'll never forget the newsletter of either September or October 1987. It DID, in detail, describe the upcoming October crash. I don't recall the issue as I don't recall if issues were released at the beginning or end of the month -
As part of the newsletter, there was the primary interpretation - "bullish market", then there were a couple of "alternate" wave interpretations described on the last page.
On Friday's open, October 16, 1987 I bought OEX puts one strike below the current level believing that the we were siting on the preface described in one of those "alternate" interpretations, and if correct, it was the day I'd been waiting for, for a long time.
A Friday expiration where just out the money premiums would be at their lowest, and potential, therefore, greatest. Plus no waiting around to see the outcome - great for impatient me.
I started Friday with just under $7,000, willing to risk half, by the close I had over 32,000, rolled into next cycle - very overpriced I thought at a 16 premium (remember when the furture had positive premium to the cash- and exited Monday with 64,000 - had much more but my broker kept saying he couldn't get quote and fill info - get out - it's going to bounce, etc, so I got out.
MY problem was I tried applying these patterns in the options market where direction is important, but emotion and time of entry are equally or possibly more important, and I exercised poor management by going for the long shots - short term out the money big hits. My the majority were winners, but I let them "ride the wave" looking for more - but wave move up and down, and time keeps passing - so priums deminished and i road most positions to exit as losers, still most often after they expired they "would have been winners - had I bouth another cycle out, or took my profits along the way - learned all about the "greed" factor the hard way..
That lead me to the method of SP futures trading I use today.
It works on a 5-min chart, trades average 28 mins, drawdowns intraday average under 5 points (range 0 to 10), profits average more than anyone here would believe, and best of all it's simple. And using fixed exit targets elimated the greed factor - do I catch tops and bottoms of a move - by accident maybe 1 in maybe 75 or 100 times - don't keep count - but who cares (actually some part of me does - but he'll have to just tolerate me, he can't run me any more.
Though Fib, Elliott, Gann, etc. played no conscious design part in the evolution of the method, having had knowledge of them may have helped me "see" the patterns I now use.
Once in a while when I get a trade signal that my mind "doubts" is realistic in "this" market, I even weaken for a moment and throw Fib lines on the day's extremes to see if it makes sense within those - most often it does and that makes me feel a little "safer" taking the trade - I take the trade either way, but as much as I work to keep my "mind" out of my trading it creeps in sometimes and needs a little pampering.
I must admit the surprise when I find 5 out of 6 times I do this my system target and the Fib numbers are within 1.00 to 1.25 of each other.
Again, I may only do this 2-3 times a week or less as time passes, and average 40 trades weekly, so statistically this is of no significance, but still I find it "interestingly repetitive".
Sometime I think my current method works so well because it gives no attention to what people may be thinking, what the world appears to be doing, it only responds to what the price is doing now in relation to the prior 10 to maybe 60 minutes at most.
Where it will outside of the next 6 to 8 point range (3 to either way) is of absolutely no concern to me or the method. When this trade ends, it's just a matte of awaiting the next signal, buy or sell, it's no matter, it just is going on NOW.
Statistically, averaging better than 8 trades a day, I'm not more than 25 minutes from the next trade as the last trade took on average 20+ minutes. So this handled my lack of patience.
I guess that's why I found the trading "diet" I can live with - fits my personality, avoiding large setbacks (fear), neutralizing greed, and satisfying my need for relatively immediate results.
For me ithis also raises the question of why Trend Lines work so well (again not part of my method) - just an unavoidable observation after seeing charts daily for so many years, Is there some magic that make prices follow a line, or are there enough people who "believe" that prices move along a line and set their buy and sells accordingly.
Somewhere I read: "A lie told often enough, becomes a belief, and finally a truth."
Good trading to all
ETRDR
