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Are Fibonacci retracements and projections useful?
If you want to use fib, you have to do a lot, and I mean a lot of backtesting before you start to understand what fib is. It's like everybody can buy a piano, but it take time to find the melody. Don't trust people there say it's random lines. …
However, there is a huge difference with VWAP. VWAP is the same on all charts, all time frames. It's also just one line for an entire session, not 10 lines or more.
Whereas fibs are different depending on how you draw them, depending on where you start them, the time frame, and there are 5-10 lines on a chart, maybe more (I think one guy had 15 lines in a 1 hour period).
Fibs are not magical. The actual number itself, the fibonacci sequence, is not what is important if you are using fibs in your trading. Instead, you could take any nearby number such as Fat Tails suggested (using 1/8ths) and price will "interact" with these lines in the same way it interacts with fibonacci sequence numbers.
Fib lines on your chart are not predictive. Instead, they are simply providing you context. They are not telling you what to do. in fact, all the "pro fib" supporters so far have said this. They are not telling you what to do, they've said.
They are just framing price. There is no difference in framing it every 12% vs framing it on fibonacci sequence. And if you accept that, then you are left with discretionary trading decisions based on these non-predictive lines.
And as I've demonstrated in the Random Line Thread, the human mind is a powerful tool when it comes to selecting which lines on a chart are "good" and which are "bad" in hindsight. In other words, you can "frame price" with lines say every 1/8th and achieve the same statistical result as framing it with a fibonacci sequence.
That's my whole point to everyone here, in my opinion, fibonacci's are no more useful than random lines, murrey math lines, or any other set of lines on a chart. As I've said before, those traders that are successful with fibs are not giving themselves enough credit. Fibonacci sequence has nothing to do with it.
There are some traders out there that trade based on lunar cycles and astrology in general. There are some that believe Gann was Jesus resurrected and the master of all markets (I jest, but not by much for some).
I'm simply suggesting that believing that Fibs are better than a non-Fib number is of a similar ilk.
And I'm suggesting that traders that believe in astrology, Gann, Fibs and so forth, would become far better traders if they took a more rationale and balanced approach to trading.
I would say this is probably true even if fib levels actually turn out to be really predictive.
In other words, if we assume that VWAP or something else, like prior highs and lows, are actually significant in some way that a very good backtest would validate, traders who use them successfully are still, for the most part, succeeding with them largely via exactly the same phenomenon that Mike refers to with lines that -- for argument's sake -- are not "objectively" meaningful.
For one thing, how many traders on this forum have VWAP, or prior high/lows, or one thing and another on their charts and are not succeeding? Many.
One only needs to follow along on the spoos thread to see how fluid the decision-making can be, among successful traders who are using these very tools. Alternatively, many will focus on these same tools, expecting the tool to be what decides the question, and find it really isn't.
Of course, it probably is better to be using something that is, in fact, "objectively" meaningful than something that isn't.
One of the lessons available from the Random Line Theory thread (which does not say all lines are "random" by the way ), is to turn the attention to the trader, not (only) to what's on the chart.... Or I think so , anyway.
Last time i checked, there was 3 lines above and 3 lines below the VWAP representing the standard deviations. Add to that the 3 days VWAP, weekly, monthly and yearly you begin to get quite a few lines. Just to add more confusion those volume profilers, you know these traders with their myriads of lines representing each low and high volume nodes for a given interval. Now we are really talking about a smorgasbord of cheesy lines.
its absolutely ludicrous to believe that the actors who drive price are sensitive to fibs. fibs are easily the most over analyzed data available by naive traders, which in of itself renders the data uninformative i.e., they are a self-reinforcing delusion.
), is to turn the attention to the trader, not (only) to what's on the chart.... Or I think so , anyway. 