But the advantage of Fibonacci (over f.i. 1 MA line) is that there are so many Fibonacci lines that the probability that market will reverse at one of them is much higher. The more lines the more opportunities to proof Fibonacci works. Same applies for trend and resistance lines.
Which of course leads to many questions. E.g., How do you measure "when used correctly"?. How do you objectively determine which highs/lows you will use when calculating retracements/extensions? How close to the retracement does the price need to be to be considered "working"? If price stops on a dime at the retracement, goes up for one bar and then blasts down through the retracement point did that retracement "work". Etc, Etc. (This is what I do since I retired from the mob).
Seems to work better on extensions than retrace. OTOH when a move retraces quite soon after happening, the midpoint can be significant, but 50% isn't a Fibonnacci number as such....
"Fibonacci" only works post hoc -- and that is no way to trade, because post hoc, *everything* has an explanation. For example, if I look at some data and declare that my Fib numbers show the SPX at 2450 tomorrow (with accompanying detail, numerous mentions of The Golden Ratio, and a sunflower/Nautilus reference), and the SPX shoots to 2460, I still win, because I then incorporate the magical Methodological Get Out Of Jail card, and observe, "and then the Market broke its Fib level of 2450, blah-blah-blah,..." and I declare it a new regime. Yay, me. Yay, Fib. Fibonacci wasn't wrong, "the Market changed." (As if, yeah.) Flaming bullshit. (In fact, a *lot* of so-called "Technical Analysis" suffers from this same plague. And so it's really *not* that Fibonacci's [brilliant!] observations are BS as such, but that their application is. In a sunflower, as in a Nautilus, space/support/cellular structure, are all ruled by something handily approximating the Golden Ratio. Sweet! And you can open a lot of sunflowers, and any ol' Nautilus, and test the ratio, and find it holds. The same does not hold in trading markets. The same is true of my favorite TA tools -- being MFI, Lane's Stochastic, ADX/+DI/-DI, ATR, TRIN, TICK, even VXST_&_ES..... I can look at any time period I care to use, tune the look-back parameters, and then count a good 70%-90% of usable turns. That's pretty good (I think), but IT HAS TO BEAT A 50|50 COIN-TOSS to begin with. Try that with the ol' Fibbies. I dare ya. Or, Mr. Elliot's Special Idiocy. Or, Online Trading Academy's (so-called) techniques. "Yeahhhhh-hhhhhh. About that,......"
Speaking of coin tosses, I know we all remember famous examples of (competitive) trading portfolios that were comprised via the tossing of darts at pages of the Wall Street Journal. I wonder, though, if they were all automatically long. What if there was an additional chance parameter, of incorporating a coin toss to decide whether to short or to long the position? Anyone aware of such a thing? Which then begs additionally..... the use of a 6-sided (cubic) die -- if it shows 1 -- you enter the underlying long 2 -- you short 3 -- you buy a call 4 -- you buy a put 5 -- you sell a call 6 -- you buy a put. Hell! Why stop there!! Get two different die, and roll 'em both, and use combination positions! Woot! I need to find some vict---- I mean, students, and let them go to town on this.....
Almost there,... The two dice in your analogy would be one for all price cases. The other is for all the volume elements. The two together would define all the possible permutations of PA in the markets. Where the 50/50 probability paradigm transforms into a new paradigm is from the beginning of the throw to the final result which at resting position would be 100% known. The insight comes from expanding the moment from the throw to the final resting position of the dice. In that expanded moment price determines whether the volume element is statistically significant. If not, then in that moment, that volume element is suppressed resulting in a weighted dice (from the suppression of all possibilities to a smaller set.) The volume die is also weighted by the fact that there is an observable pattern in volume. Where volume is in that pattern determines where price can go. That pattern has a definable characteristic - that it progresses to the point of failure - every,... single,... time. Sounds like gibberish, I know. However it is an accurate description of a phenomenon from a different perspective. The analogy is realized when moving from concept to facility through work. With my limited understanding of quantum physics, my interpretation is that current quantum computation is attempting to contain this paradox in fuzzy logic. I could be mistaken, it's not where I've directed my mental efforts. The idea of observer influencing the observed comes to mind. Thoughtful civil discourse will be engaged. Ad hominem attacks met with a polite and lasting ignore. If methods utilizing the Fib methods were not based on any sense of truth, they would have been abandoned long ago. The fact that some traders assert their success and profitability with it, leaves the crux of the matter on the individual trader to bring what's necessary to have the method work. A successful trader can make any method work, if that method has any basis on what is observable in the markets. I suppose one could make the point that the mystical bias of the fib method has an appeal and that to those that it appeals to get washed out of the markets on a continual basis. Who knows? In regards to this aspect, I do not know. I just know what I know from building my mind to see opportunity where no others can, or are unwilling to. It's been a lifetime effort. I have the rewards and scars. Please, enough of the broken-record to prove it, blah, blah, blah,... There is no amount of proof in the world that can change a doubting mind. Only doubting a doubt gets one off that hamster wheel. In the end(beginning), it's the individual's efforts in doing what's necessary for success that is the abyss. For me, it was placing my existing beliefs of what "I know this is right" to the side. To examine where these beliefs came from, whether they were self-chosen or accepted through enculturation. Higher levels of understanding are inclusive of the prior level. And like a house of mirrors, when one looks out thinking they are seeing something "out there" in reality are only seeing a confirmational bias of their own beliefs - their own image as it were. Ever see a kitten confront their image in the mirror the first time? First it can't even see the mirror. Maybe Spock with a Rosetta Stone will show up.
Depends on how Fibs are applied - I find them very useful when looking at the larger swings with stocks and indexes. I find that the measured moves combined with Fibs & using volume to confirm the turns provides incredibly good entry/exit points. Risking 45 cents to make $7 per share makes for an extremely skewed reward to risk. Here are 3 IMGN shorts. Fibs provided the short entry points when price turned at .62 on the first 2 rallies and at .38 on the third rally indicating that supply was to much for the longs to overcome. The measured moves (blue squares) are identical in size , derived from the charts swing high to first low, these measured moves gave the profit targets. This is not an exception, this is fairly common.
Great post thanks. This thread was full of those who felt it necessary to vent their feelings and or to post what they might have thought to be entertaining. Your post was on the topic are really contributing to this thread. I was going to ask all the posters who just want to display their clever use of language contributing nothing of value. I realize that most will scoff at using Fibonacci as being worthless, but if any here would like to see a live trading session on Skype or Teamviewer please sent me a private message. Then I will trade using the Fibs to make profitable trades. Your Measured Move is a good example of the power and predictability of the fibs and display that they will not be a lagging indicator. Additionally, I will supply an excellent book on Fibonacci by the expert, Larry Pesavento.
"Fibonacci's" is not a method -- it is one tiny piece of Mandelbrot -- who, had a dollar for every yutz who tried to predict shit ex post facto, would be a very rich man.