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Are Fibonacci retracements and projections useful?
Started: by Big Mike Views / Replies:25,194 / 430
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Are Fibonacci retracements and projections useful?

  #91 (permalink)
Market Wizard
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fminus View Post
I have a magic 12-inch ruler that I use in lieu of fib retracement or extension lines. I mean a physical ruler I keep next to my desk that I put up to the screen when I am considering a trade. I used to it to measure my body parts when I was bored and waiting for a trade but have adapted it to work for my trading. It works because I can consistently apply the same exact method over and over again regardless of emotion and feeling. I've seen that price likes bouncing off the number 3. Sometimes price bounces off my number 3, sometimes it doesn't reach, and sometimes it goes right through. But I'm sure it works about 50% of the time which is definitely more than random. It's magical and I will punch your mother in the face if you say it doesn't because I've seen first hand that it works.


sigh. [sarcasm off]

LMFAO

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  #92 (permalink)
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fminus View Post
I have a magic 12-inch ruler that I use in lieu of fib retracement or extension lines. I mean a physical ruler I keep next to my desk that I put up to the screen when I am considering a trade. I used to it to measure my body parts when I was bored and waiting for a trade but have adapted it to work for my trading. It works because I can consistently apply the same exact method over and over again regardless of emotion and feeling. I've seen that price likes bouncing off the number 3. Sometimes price bounces off my number 3, sometimes it doesn't reach, and sometimes it goes right through. But I'm sure it works about 50% of the time which is definitely more than random. It's magical and I will punch your mother in the face if you say it doesn't because I've seen first hand that it works.


sigh. [sarcasm off]

The number 3 comes UP often for you .. Wonder why

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  #93 (permalink)
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bobwest View Post
However, it is not likely that it will change anyone's opinion either way.... unfortunately.

To be fair, quantifying something in a meaningful way is hard. It takes mathematical skills, lots of data, ability to figure out the right cases to test and how to do it, understanding of probability, and an understanding of trading, and a willingness to undertake the project and devote the time to it.

Opinions, by contrast, are easy.

But I would like it if someone did give it a shot. (Probably not too many fit that bill, however. I certainly don't.)

Bob.

I was hoping someone would be willing to discuss the two articles I linked to earlier in the thread written by Adam Grimes where he did exactly that.

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  #94 (permalink)
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TheShrike View Post
I was hoping someone would be willing to discuss the two articles I linked to earlier in the thread written by Adam Grimes where he did exactly that.

Thanks. I'll give them a look. Somehow missed the post.

Bob.

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  #95 (permalink)
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Big Mike View Post
50 is not a fibonacci number.

Mike

1 1 2 3 5 8 13 ...

2 is a fib, so why not 1/2 or 50%?

I agree that 50% retracements happen a lot BTW.


Separately, here's a curve ball.. Maybe fibs are useful to the reader as a heuristic. A move with a 68% retracement may give rise to a certain intuitive feel as to what may happen next.

I agree the notion that the market "has" to move a certain way (fib or otherwise) is complete BS, but perhaps the right brain uses fibs as a compression algo to store memory of past price action.

Perhaps the market doesn't obey fibs but our brains use them to store memories so we think the market does. Our wetware did evolve in an environment chock full of fibs after all. Using fibs in memory formation would be an efficient way to internally represent the world around us.

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  #96 (permalink)
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bob7123 View Post
1 1 2 3 5 8 13 ...

2 is a fib, so why not 1/2 or 50%?

I agree that 50% retracements happen a lot BTW.


Separately, here's a curve ball.. Maybe fibs are useful to the reader as a heuristic. A move with a 68% retracement may give rise to a certain intuitive feel as to what may happen next.

I agree the notion that the market "has" to move a certain way (fib or otherwise) is complete BS, but perhaps the right brain uses fibs as a compression algo to store memory of past price action.

Perhaps the market doesn't obey fibs but our brains use them to store memories so we think the market does. Our wetware did evolve in an environment chock full of fibs after all. Using fibs in memory formation would be an efficient way to internally represent the world around us.


I find this comment very pertinent for this discussion. Right brain is non-verbal and intuitive. Maybe a fib user is a person that uses his right brain more than his left hemisphere which is more verbal and analytical for reading the markets.

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  #97 (permalink)
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bob7123 View Post
1 1 2 3 5 8 13 ...

2 is a fib, so why not 1/2 or 50%?

I agree that 50% retracements happen a lot BTW.


Separately, here's a curve ball.. Maybe fibs are useful to the reader as a heuristic. A move with a 68% retracement may give rise to a certain intuitive feel as to what may happen next.

I agree the notion that the market "has" to move a certain way (fib or otherwise) is complete BS, but perhaps the right brain uses fibs as a compression algo to store memory of past price action.

Perhaps the market doesn't obey fibs but our brains use them to store memories so we think the market does. Our wetware did evolve in an environment chock full of fibs after all. Using fibs in memory formation would be an efficient way to internally represent the world around us.

When you say "a lot", do you mean they happen more than random? Wouldn't one then be able to just hunt for 50% retracements and expect to be able to trade them profitably?

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  #98 (permalink)
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FWIW,

All the technical indicators use either the price or the volume to compute information. Fibonacci indicators use neither price not volume, so it is strictly not a technical indicator, hence it is cannot provide an entry or exit points like MACD, RSI etc.

Fibonacci tools can be used for visually representation of possible pullback or trend extremes. In my experience, trends usually go to about 100% Fib extension (ie, about same range of prior trend). Retracements are that useful beause there are too many levels too close to each other (23.6%, 38.3%, 50%, 61.8% ... ).

Experiment with them. If you find them helpful use them. No need to do elaborate studies on this subject, IMO.

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  #99 (permalink)
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cogito View Post
Experiment with them. If you find them helpful use them. No need to do elaborate studies on this subject, IMO.

That's not the point of this thread. It's not if this works for you great, this thread is if there is a quantifiable way to prove they work.

If they don't, then you shouldn't waste time one them.

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  #100 (permalink)
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TheShrike View Post
When you say "a lot", do you mean they happen more than random? Wouldn't one then be able to just hunt for 50% retracements and expect to be able to trade them profitably?

I find this funny because 50% it self is just a coin toss...

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