Thank you. There's something that puzzles me, perhaps you can add some clarity. If I take these fibonacci lines and use different bars enough to create a 1/2 zone offset, it appears those lines also intersect the same amount of bars. Am I looking at this correctly? Can these lines be applied bar by bar? Intra 5min bar?
If we use the 4/10 bar, wouldn't the ratio lines adjust themselves? If so, then I can see in my mind's eye a shifting up of the horizontal lines so that they are in the middle of the zone boundaries they currently define.
I'm afraid we're speaking different languages! I don't know what you mean by "ratio lines". And "zone boundaries" might be the vertical dashed lines which are just option expiration dates. Or maybe you mean something else. The horizontal lines are the percentages defined by Fibonacci and they are determined by the high and low we are measuring, so they wouldn't shift.
Ratio lines = zone boundaries = horizontal lines = percentages defined by Fibonacci I got it. Thanks for clearing it up. The swing high and swing low define the two points by which to apply the fibonacci ratios displayed as horizontal lines.
I guess the question is "who cares"? If the Fibonacci tool (qua tool) works, if its use can make you money, what more do you want? I am not interested in the metaphysical verity of any theory built on this guy's mathematics.
I willing to suspend disbelief and approach the subject with an open mind. Experiments and testing will reveal the truth of the matter. Back to the idea of trading bar-by-bar. Couple of questions to the older, wiser more accurately informed traders out there. On the 5min, is there a Fibonacci tool to anticipate the next bar? How many bars are the minimum to get the reference points to use the tool? What is the Fibonacci tool that operates on the DOM? Is there a current platform that supports this?
I understand that there's a book called "Trading Bar by Bar". I have not read that book so don't know what he says in it, but, as you say we are looking for a way to anticipate the near future. I have found that the Fibonacci tools (retracement and extension) are extremely useful in finding support and resistance levels. Clearly you would be buying at support and selling at resistance. The drawing tool can be used on its own or in conjunction with other tools that come free on any trading platform to find the turning points during the day. With these tools it should be possible with some experience to put orders into the market (the DOM) in anticipation of price turning at or near those numbers. As far as the number of bars is concerned you're just looking for a clear high/low swing to use for the retracement tool, or a "high/low/high" or "low/high/low" for the extension tool. This just takes a little practice to use properly.
There is a right way and a wrong way to use fibs. As per the following ES 5 minute chart traders typically use point 1 top swing high (following overnight globex back and forth zone) and point 2 bottom swing low which gives them a 61.8% retracement above the actual lower swing high short opportunity. What I have learned is to look at price action to tell me which points to use. And instead use point A large thrusting red candle coming out of small consolidation zone, after first initial down wave, and point B (bottom of red candle) of double bottom. The reason I didn't use low of point 2 is that that candle's wick is just a few panicked traders having their stops run. Not important. I therefore almost always prioritize opens and closes over highs and lows. And BTW looking at the 1 minute would show the same but just be a more crowded screenpic. So I just stuck with the 5 min one in this post.