As I posted several times in the past about Fib levels: Fibonacci trading doesn't work. Fib levels are not more significant than any other level. Studies such as the following: "Our conclusion must be that there is no significant difference between the frequencies with which price and time ratios occur in cycles in the Dow Jones Industrial Average, and frequencies which we would expect to occur at random in such a time series. ... The evidence from this paper suggests that the idea that round fractions and Fibonacci ratios occur in the Dow can be dismissed." http://www.cass.city.ac.uk/media/stories/resources/Magic_Numbers_in_the_Dow.pdf Lets see - major institutional study showing no value to Fibs over a long timer period, or Logikos CherryPicker who swears by them... Hmm, which to choose? And uses 4-5 data points as "proof" something no statistics-knowledgeable person would ever dare claim...
I've been trading for 2 decades, I managed a hedge fund and now I trade funds for clients as a CTA. I've been in every trench there is and I've used every tool there is. And here's what I know about technical analysis, including Fibs. Traders are highly likely to see what they want to see and they tend to search for evidence to support their current views. I know this all to well because I fell into this trap early on. Nowadays I enter the markets when I'm trading and when I'm doing research completely void of bias and I search for evidence to develop my game plan. I can assure you that if I entered the market with a certain tool in mind, or a certain setup I'd be sure to find it if I looked hard enough. I have enough experience to know that the markets are largely random but psychology does play a small role. Fibs, along with all other technical tools, fall into the category of useful but that's where it ends. No tool has any better predicting power than the rest. Technical Analysis and trading is 90% art, 10% science. Try a little exercise. Pick your favorite tool or setting and enter the market with an open mind and search and see how many times your setting (let's call it a 50% retracement) is actually hit. Pick a sample of say 100 occurrences and track how many times the 50% results in a profitable trade. I'm gonna guess somewhere in the area of 33%. That doesn't mean Fibs are useless tools though. I find them very useful for targets but I take them with a grain of salt. If it ain't gonna get there it ain't gonna get there. Shit, sometimes it flies right by the 50% and other times it lands smack dab on there. I can probably prove mathematically that each event happens about 33% of the time. I'm as sure of this as I am a coin coming up tails 50% of the time and head 50% of the time, given a large enough sample size. Open your mind and look for the weaknesses in the tools, not the strengths. Your game will improve 10-fold if you do.
I couldn't agree more. When the price heads toward a Fib level there is a 33% chance it will fall short, a 33% chance it will hit and stop, and a 33% chance it will fly right by it. I think Fibs are useful if they are incorporated into your trading plan as a rule that says, "Take profits at the 50," for example. Other than that they don't mean a whole heck of a lot. There is no substitute for judgment and experience no matter what you do.
Congrats on your qualifications. Contrary to what TraderZones thinks. I did not "cherry pick" those examples. I just plotted those 10 years of history because of the prior post referencing the depression years, and starting applying the indicator to the major peaks and valleys. Hey, it worked, so take it for what it's worth. I'm not a Fib apologist. I know the limitations of TA. I'm not a fund manager, but I've been battle tested for 18 years. I'm a Chartered Market Technician, Level 3, and have spent an enormous amount of time in study during those years and have traded nearly everything. I just don't do this professionally (but wish I did). On a practical level, I find 38.2 Fibs can indicate a highly reliable setup when used in conjunction with other factors, some of which are NOT TA-related. Fibs also factors in to what I call a "golden trade", when the risk to reward is overwhelmingly in my favor, but just like the planets lining up, I have a set of criteria that must line up just right. I guess the bottom line is that every successful trader, one who is consistently profitable, can't attribute the success to just luck. He has some methodology. If he says he buys when the dog craps in the front yard and shorts when it craps in the back yard, more power to him if it is making him money. I'm in no position to tell him what he does is any better or worse than what other do, or myself.
Hey 5 wave decline, is that your ugly girlfriend? The original thread "Financial Reckoning Day" was supposed to be purposefull and give a warning at what will occur. To bad ET is full of imbeciles, oh well. As far as the discussion between elliot wave or no elliot wave, fibs or no fibs. Both traders are right. One should use what one uses to one's benefit, just do not ever create a fixated mind set and all could be well. Once you make a fixed opinion, the market will move against you and if you do not have the flexable mind, you will not get out when you should. Know the macro fundamental situation, however keep a flexable mindset for your day to day trading. The fibonacci record of the Great Depression was just plain good reporting. If you do not think that many of the algo's that CONTROL THE MARKET, are not based upon fibs and elliiot wave, then you are fooling yourself. Why do you not think that these turning points show up at certain time frames and magnatudes? Whether real or not, if enough people or enough money is tied to such algo's, then the market will behave by the priciples within the studies. ET, take something valuable and mock it, typical. I could care less, I know what the market will do and when it will do it. Cajooling and being a imbecile wont change the fact. Good Trading ES Master.