I can guarantee that it's not just in hindsight. I put in orders in advance using the fib levels and it normally turns very nicely at the numbers I've calculated.
I agree with the fact that Fibonacci when used profitably in trading it is a predictive indicator nor a lagging one. So, Yes one can use the fibs to accurately predict price levels. As to how to learn it, there are numerous books and posts on the internet, however, most provide meaningless information which leads to many coming to the conclusion that Fibonacci is a useless tool. It will work on most time frames so 5min, Sprout will be a good interval for scalping after review of longer time frames as well.
MACD, thanks for the support. I did in fact write an article that appeared in The Technical Analysis of Stocks and Commodities magazine about a year and a half ago which explained my method of calculating the Fibonacci ratios.
"Works" = When used correctly, the Fibonacci trading system will produce consistently profitable trades. (BTW, Mr. Soprano -- I am a huge fan of your business ability and your excellent TV episodes.)
How do you mean this? Is there more than one way to calculate Fibonacci ratios? I thought that these ratios are fixed values?
There are various ways to calculate the fibs depending on which high/low swing you choose as your basis. And of course you can use either the retracements or the extensions (sometimes called projections).
Sprout, I'm sorry I missed your question. One good way to start on the five minute chart is to find a clear high/low swing and use it as the basis for a retracement study. You would use your Fibonacci tool starting at the high in an uptrend and pulling the tool down to the low. Then you can observe what happens at the various levels, the 61.8%, 50%, 38.2%, etc. to see where is support/resistance. One of those levels should offer an opportunity to buy or sell, depending on the trend at the time. If the price pulls back only to the shallower level it's a strong uptrend and may continue up to the 127.1%; if at a lower level there might be some weakness. In a downtrend everything is upside down of course. Then you would be drawing the fibs in the opposite direction. It may take a bit of practice but you will see that these numbers are surprisingly strong when they come into play.