Fibs and Energy Markets

Discussion in 'Technical Analysis' started by Neodude, Aug 24, 2006.

  1. Neodude

    Neodude

    Recently I had the opportunity to talk with an Energy trader. The guy isn't one of the largest traders on the institutional side, but big enough to be know in the right circles. Anyways, my discussion with him wasn't centered on trading per se, but I did get to see what he puts up on his charts. What I saw to my surprise were fibonacci retracement levels and ATR measurements. I always thought of fibs as being very much subjective, just like Elliot wave theory, but knowing that successful traders are using it, I thought it would be a good idea to explore the subject a bit further.

    Therefore, I'd to ask if anyone who is trading nat, spark or crack spread has had success applying fib principles to these instruments. Is this a good and reliable tool or is it just a psychological crutch? Are fibs popular amongst other energy traders just as pivots are amongst futures traders?

    -Neo
     
  2. I had the pleasure of working with a very successful quant at an energy trading firm in Arizona several years ago, and I learned that he used LOTS of fib calculations (time zones, retracements, arcs)... mostly as a trigger for something else I guess.

    Richard
     
  3. What I love about the Fibs is the fact that they are based on math. So are the other indicators you might say.

    Yeah... but the golden ratio is not only in trading. It is in many other field of the universe........unfortunately I cannot say that about Slow Stoch.


    LMAO....imagine getting a fight with your girlfriend......All of the sadden the RSI and Slow Stoch. start to rise....(deal with me, I am day dreaming here) When RSI hit above the 70 and Stoch exceed 90......the whole relationship crumbles.....

    Hmmmm......makes me ponder. To what point can I push my girlfriend with out her getting mad at me and resulting in a fight??
     

  4. HGF07 (March Girlfriend Futures)? We can do a lot of stuff with this. You can trade precious metals with this.

    Richard
     
  5. Well, lets hope that it will be non-delivered future.
     
  6. The Fib statistics is very poor.
    You may see
    http://www.elitetrader.com/vb/showthread.php?s=&threadid=81457
    On the other side, no Fib website has ever presented any positive [or, at least attractive] statistics on Fib levels and their application, AFAIK.
     
  7. Neodude

    Neodude

    I would agree with you, but I've done some more digging since my initial post and it appears that some of the old Enron guard are fond of fib levels too. I haven't had a chance to talk with any of them to determine if they use them to make trading decisions, but they are definitely looking at them during the trading day. Maybe sometime this week I'll get to talk with some of the guys who worked with Louis Bacon, it would be interesting to know what they think is important.

    -Neo
     
  8. i can say with certainty that alot of fellow natty traders use fibs for trading including myself. the beautiful thing about them is that enough natty traders use them to make them self fullfilling. I am not at work at the moment or i would post the daily continuation chart i use. basically, the 7.915 high of last week was a perfect 38.2% correction of the selloff from 9.05 down to 7.216 (7.915). the low from yesterday (6.91) was a retracement level as well although i don't have the #'s in front of me. next level i do remember now that we have breached 6.910 is 6.545. if storage is a little stronger than expects tomorrow, we may see that come into play before the weekend.
     
  9. Fibos work because the fibonacci ratio is an elastic measure —
    regardless of the distance of between the 2 points on which the
    ratio is drawn or the financial instrument, and since and because
    'waves' are discrete, fibo levels retain the fixed ratio in Projection
    and Correction/Retracement fibos

    Phyllotaxy is the study of the order or arrangement of leaves on
    the stem; the science of the relative position of leaves and the
    fibo ratio/numbers is often seen:
    http://britton.disted.camosun.bc.ca/fibslide/jbfibslide.htm

    however, plants don't think, 'Oh, I'll try a 5/3 leaf distribution and
    see how that helps me grow'

    http://milan.milanovic.org/math/english/fibon/index.html
    "Why do these arrangements occur ?
    The same happens in many seed and flower heads in nature.
    The reason seems to be that this arrangement forms an optimal
    packing of the seeds so that, no matter how large the seed head,
    they are uniformly packed at any stage, all the seeds being the
    same size, no crowding in the centre and not too sparse at the
    edges. In the case of leaf arrangement, or phyllotaxis, some of
    the cases may be related to maximizing the space for each leaf,
    or the average amount of light falling on each one.
    When new leaves grow from a plant, they grow in a spiral around
    the plant's stem. Nature spaces the leaves in this way so that
    higher leaves do not shade the lower leaves too much from sunlight.
    The number of turns in the spiral (from leaf to leaf) and the
    number of leaves that exist in the pattern in all cases express
    a Fibonacci fraction and therefore a Fibonacci ratio. The same
    pattern repeats again and again as the plant grows.
    In the case of close-packed leaves in cabbages and succulents
    the correct arrangement may be crucial for availability of space.
    So nature isn't trying to use the Fibonacci numbers: they are
    appearing as a by-product of a deeper physical process. That is
    why the spirals are imperfect.

    The plant is responding to physical constraints, not to a mathematical rule " —

    Price is responding to Buy/Sell constraints, not to a mathematical rule —

    which is about as good as it gets in explaining why financial fibos work !
     
    #10     Dec 21, 2006