Has anyone ever used Phi Ellipses?

Discussion in 'Technical Analysis' started by TraderGreg, Nov 12, 2008.

  1. Has anyone ever used Phi Ellipses?

    I stumbled on them in a book today. Neither Oanda, NinjaTrader, nor TOS has them.

    They looked very interesting (so does every indicator in a book :) , but still I would like to experiment with them).

  2. Smurfie


    Hey Greg

    I know which book you're talking about. I never could make heads or tails of how to actually trade those bad boys at the time. Luckily, I didn't actually pay for the book but checked it out from the library.

    Older and wiser now, I realise it's all vintage snake oil.

    This excerpt from a review on Amazon sums up my feelings pretty well:

    "For example, the author tells us that you can always draw an elliptical envelope around short term trends. You never quite know how long the price is going to stay in that ellipse, but if it breaks through the wall, then, have you guessed? That's right, time to start carefully drawing the next ellipse. Sometimes, prices are in two ellipses at once. The problem is that you never quite know whether you've got the right ellipse, because the authors couldn't possibly give away their proprietary calculation method for only the cover price of the book."

    Run away man! :)

  3. Smurf,

    I checked the book out from the library as well. I do not think this review is quite correct, however.

    Firstly, it says when the ellipse is broken it is time to start drawing the next ellipse, but when a trendline breaks don't you begin looking for the next one?

    Also, although I only looked over the book for about half an hour, I believe I understand the method - you take the point at which the move started (such as the point of breakout from consolidation, or extreme high/low), and then created the ellipse so that the perimeter touches both the low correction of the move and high correction of the move.

    The three points will give a perfectly defined ellipse that have a major axis to semimajor axis (I believe those are the correct terms) ratio of some variation of important numbers related to the golden ratio.

    Lastly, a price may be in two ellipses? Well, there can just as easily be a short term trend and longer term trend.

    Don't trust everything you see. I'm going to try the trial software from the guy who wrote it ( http://www.fibotrader.com/index.php?lang_user=en ), and if I find nothing conclusive I'll move on.

    I have several other things I'm going to do, however. I'm going to create a binder of scanned chart patterns from books for reference. I'll get around to the ellipses likely next week. Every strategy is worth analysis in my opinion.

    (About the software, I believe an advanced stats program such as the R program will be able to do this without any fees, but it is a bit complicated. I have it, but haven't had a reason to learn it yet -- if the software reveals nothing I'll just put it in my longer term to do list and work on more normal trading stuff).

    Open mind, Smurf. I appreciate your inputs in my threads, and I would gladly like to hear any other recommendations you have.

    Good trading,

  4. Smurfie


    I was exposed to this early in my trading career and at the time it made little sense to me. I recall wondering if what they did wasn't a way of really complicating some simpler tools like your standard channel drawing tools (Raff regression etc.). Later I got to generally deeply suspect books and blogs and such that come with software and web sites and what-nots.

    If it makes sense to you and you can make it work, more power to you and I'd love to hear more about it as you gain experience with it. However, in five years of reading several trading forums, I have yet to hear one positive thing about it or even a mention of someone knowing someone who uses it.

    Happy research