True Truths about Fibonacci

Discussion in 'Psychology' started by harrytrader, Jun 25, 2003.

  1. About

    Discovery, proves and evidence of the hidden language of DNA.
    by Jean-Claude PEREZ, September 2000

    Fibonacci, known as Leonard of Pisa, also called "the heretic one of Sicily", is regarded as that which, to the Middle Ages, will give their foundations to our contemporary mathematics. In addition to the introduction of the "zero", one owes him this famous integer numbers series known as of Fibonacci's numbers series :

    1 1 2 3 5 8 13 21 34 55 89 144 233 377 610 ...

    Each term is obtained there by making the sum of the 2 precedents. The ratio of two consecutive terms (exp. 89/55) approach very quickly the famous proportion PHI known as "the Golden section":

    PHI=1.618033989… Ancient people considered the Golden section to the same scientific level as PI ...

    As testify some the enciphered messages from genius Leonardo di VINCI, they knew even subtle relations between these two universal constants (see the cover of the book " the deciphered DNA ", summarized now… ).

    When the radius of the circle equal exactly ONE,

    And, When the square is 1.618 by 1.618 length,

    Then, surface of CIRCLE = PI and surface of SQUARE = PHI*2…


    Ratio between Surfaces CIRCLE/SQUARE is PI / PHI*2 = 6/5 = 1.2

    6/5 = 1.2 was called by ancient people the "Osiris section"…

    The Golden section is discredited today, one even equipped it with a esoteric connotation and sometimes even not very advisable...

    Always it is that Nature uses this golden section in its constructions : for example the shell of the nautilus or snail ...

    I demonstrate that this proportion has properties of "mathematical cohesion" which must, doubtless, to result in a cohesion and a solidity in the plan of mechanics. Nature thus knew to discover a subtle marriage between aesthetics and the effectiveness (one speaks even about a possible "principle of economy" on this subject).
  2. As he puts it 'one speaks even about a possible "principle of economy" on this subject' and I affirm that it is the same kind of principle law (economic principle in the sense research of optimality and stability of the system from the economical or energetical point of view) that my equations follow and so the existence of Golden ratios in stock market has more to do with that principle that with the supposed psychology of crowd or more appealingly called by Prechter "socio-economics science" which is more likely an esoteric metaphore than a Science since it is not demonstrated and could never be because in details it contains the same kind of paradoxical non-sense than Astrology at least within the framework of science. Suffice that Prechter claims only that Market follows Golden ratio but he shouldn't go further by giving fake causal explanations.

  3. *******

    Something else I would add;not to minimize the scientific logic,some of which gets blurred in the markets.:cool:

    Look on enough charts,with enough time frames; its better to have too may trend lines, color coded
    -than too few.
  4. Is there any simple trading method based on these ratios ?
  5. ...have you read any of Larry Pasavento's materials on fibonacci retracements or heard him speak? I've spoken to him on the phone several times and used his service, I find him easy to understand and extremely logical.

    rttrader -
  6. I admit that the only thing I know about Fibonacci numbers is that it was a numbering scheme devised by an Italian mathematician from the Middle Ages to predict the rate at which rabitts will multiply. Since then, it seems that these Fibonacci numbers have been used not only to explain the workings of the universe, the laws of nature and most of the physical sciences, but also human behavior as it relates to trading. Few "sciences" have crossed all such barriers. I cannot think of any others at the moment.

    Is it possible that we may have lost some perspective along the way? I think that if you have enough of these so-called Fibonacci lines, levels or retracements, one of them is bound to "work." But what about all of the other ones along the way that were so rudely ignored?


  7. I don't know him very well but he seems to have a great observation of market and I am particularly interested in the Gartley patterns and alike which are more complex than the comon flag, wedge etc. (I intend to study these patterns to map with my model). For that I respect his work as well as the work of Prechter and others I just mean that between observations of golden ratios and the research of true causal explanation there is a big gap and I can claim that I don't have the same explanation as Prechter (as for Pasavento I must look more thoroughly).

    What I mean is that the causal explanation of Prechter is wrong because he says that psychology of the crowd conducts the market whereas I say that it is the contrary and it is not opinion it is because I have a model that has no golden ratio as input whereas at the output I get Golden ratio. To explain I will take a metaphore by using the nim game . The nim game is a 2 players game which consists of several rows of objects the winner is the one that remove the last object. In a special type of nim game the rule applied limitation to the number of objects which can be removed : you cannot remove more than twice the number of objects removed previously. In the rule you don't have any Fibonacci ratio. But if you study the optimal strategy you will see that the optimal sequence should follow Fibonacci ratio. The market is somehow applying a kind of fibonacci nim game strategy against the crowd. So for me it is the market that directs the price (I mean those who organised it or the so called initiates of Dow) and not the crowd.

    Now in practice what difference does it make ? The difference is that you can better quantify in the first case whereas in the second case you can only rely on fuzzy and complex rules: when you look at Elliott wave rules there are a huge numbers of rules. The same for patterns like the Gartley pattern and other more or less complex ones. Whereas if you know that it has more to do with rationality than with irrationality you can look for something better. I have also some kind of waves I called e-wave not for elliott but for ecometric rather :) which used only two numbers from a fundamental model and yes by using golden ratios I obtain results that are closed to the calculation of my fundamental model (I mean by fundamental here causal econometric model) although it lacks some richness of the fundamental model it is an interesting shortcut as for the time of calculation (the fundamental is very long to calculate) and structuring the analysis rapidly.

    There is also big consequences as for the so called free market. Prechter and others affirm that the market follows these kind of law because the market is free whereas I affirm that it is completely the contrary : the market is not free it is constrained artificially because the kind of order it exhibits cannot occur without entropy reduction and the crowd is not capable to do so. The crowd is irrational, unstable it is the contrary to the entropy reduction necessity and any simulation made by scientists can only lead to mimetic behaviors but none will ever conduct to Fibo ratios and that's logical because it cannot be. That's why I affirm that scientifically this market is manipulated (some traders use an oxymoron by saying that the market is "enginiered" if you prefer that term) - but don't tell everybody this a secret between you and me :).

  8. You're right that's the problem that some Fibo believers have because you can take any high and low and then find a fibo ratio that suits the point. It's kind of curve-fitting then. This because they don't have a reference model so that their view is a kind of tautology. Whereas I have a model of reference which don't use golden ratio at all as input so that I can't do curve fitting. I will show you another day because it needs pictures.

    So at least my model could serve the Fibo believers that they are not just dreaming :D.

  9. In fact I use a more fundamental quantitative model than just fibo ratios. Nevertheless golden ratios are attractors (in the chaos theory vocabulary) in my model and can help the interpretation of the model. My model shows that not only there are fibo ratios in the market but that each ratio represents a recurrent structure that have the same interpretation from day to day and I will illustrate that later.

  10. The classical trading method are the one used by the elliottists. Typically one tactic is to put a buying stop above the wave 1 in a bullish trend and my model agree that there is often a break zone very early in a trend so that I called this break zone seed wave like the elliottist.

    #10     Jun 26, 2003