Why Successful Traders Use Fibonacci Retracements

[zdo 20]

Re Static or dynamic

 

1) Lines based on price - eg traditional support and resistance levels or consolidation zones (try Auction Markets). Static ie once formed, it doesn’t move up and down (much)

 

2) Lines based on mathematical derivations of price - eg fibonacci levels or "daily pivots" (try Red Team, Green Team). Static based on previously formed markets pivots

 

3) Lines partially or wholly based on or derived from non price data - eg MP points of control or VWAPs (try Trading with Market Profile) Static…

 

4) Time based support and resistance. The ‘horizontal’ line will be ‘dynamic’, the vertical ones not so much

 

The key to any straight or crooked 'line' on any chart - no matter what you name it or how you derive / program / calculate / project it – is how much it ‘matters’ when at the time it is approached… it could be as strong as the wall of china in the moment… or it’s there but it could have the strength of a frkn jet vapor trail

It's better to know it's there than not

that is

Why Successful Traders Use Fibonacci Retracements

[Ammeo 10]

Lemme see how many Billionaire investors out there use Fibonacci? the answer to this question would most probably be "ZERO".

[Diva 10]

http://www.investopedia.com/terms/f/fibonacciretracement....which is an established on this field have this to say about 'Fibonacci Retracement'

 

Definition of 'Fibonacci Retracement'

A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going higher). The Fibonacci retracement is the potential retracement of a financial asset's original move in price. Fibonacci retracements use horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before it continues in the original direction. These levels are created by drawing a trendline between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.

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Someone should correct me if this is not the position....

[Diva 10]

More on 'Fibonacci Retracement'....

Fibonacci retracement is a very popular tool used by many technical traders to help identify strategic places for transactions to be placed, target prices or stop losses. The notion of retracement is used in many indicators such as Tirone levels, Gartley patterns, Elliott Wave theory and more. After a significant price movement up or down, the new support and resistance levels are often at or near these lines.

[SunTrader 10]

Lemme see how many Billionaire investors out there use Fibonacci? the answer to this question would most probably be "ZERO".

Genius.:doh: It pays to read closely.

 

Well except for a couple that were just mentioned in Mitsu's above post. Can't get any closer unless it was in your own post.:o

[MightyMouse 12]

Genius.:doh: It pays to read closely.

 

Well except for a couple that were just mentioned in Mitsu's above post. Can't get any closer unless it was in your own post.:o

 

Steve Cohen uses a special indicator called insider trading. It works well for those who have access to it.

 

Buffet, though probably not an inside trader, gets special deals, purchasing GS Preferred issue stock paying a 10% dividend, backed by the faith and credit of the USA. As Far as I know, we didn't have access to that purchase or access to the information that AIG would use its tarp money to pay off its bets with GS.

[zdo 20]

Lemme see how many Billionaire investors out there use Fibonacci? the answer to this question would most probably be "ZERO".

:rofl:

 

Seriously though, we are talking in here about traders, not investors. Important distinction.

http://www.traderslaboratory.com/forums/forex/13692-characteristics-traders-versus-investors-forex-markets-2.html#post156184

etc

 

 

...and when you hear Buffet say: “I realized that technical analysis didn’t work when I turned the chart upside down and didn’t get a different answer,” it's obvious his proclivities and strengths are in playing the monetary system, etc. and it's a good thing for him he didn't try to become a 'trader'.

[SunTrader 10]

Steve Cohen uses a special indicator called insider trading. It works well for those who have access to it....

True but that is like saying Barry Bonds was on steroids when he sets home run records.

 

He still would have been damn close without the "juice" though.

 

Break a rule or a law and there are consequences of course.

 

But SAC is an enormous trading firm that didn't get that way purely from insider info.

Edited May 15, 2013 by SunTrader

[MightyMouse 12]

True but that is like saying Barry Bonds was on steroids when he sets home run records.

 

He still would have been damn close without the "juice" though.

 

Break a rule or a law and there are consequences of course.

 

But SAC is an enormous trading firm that didn't get that way purely from insider info.

 

I don't know how SAC got that way. You may be correct that it wasn't from insider trading. You also may not be correct. Those guys need to provide return at all costs. The easiest way to make money is with tomorrow's paper.

 

Homeruns in Baseball? Eye and hand coordination. You might or might not be shocked at how helpful growth hormones are. Hard to decide how much had to do with Juice in his case. It could be that he would have done just as well without the juice, but we will never know and he lives with his decisions and the stigma of doubt.

[SunTrader 10]

I don't know how SAC got that way. You may be correct that it wasn't from insider trading. You also may not be correct.....

$14 billion dollar hedge fund with 800 employees which was started in 1992 takes an awful lot of insider info to get to that level and a long time before being discovered - if it was all an illusion and not some substance behind it.

[YertleTurtle 10]

Diva - yes fib traders use 50% as one of their levels and no this has nothing to do with the fib sequence. They just added it because it works.

[MightyMouse 12]

$14 billion dollar hedge fund with 800 employees which was started in 1992 takes an awful lot of insider info to get to that level and a long time before being discovered - if it was all an illusion and not some substance behind it.

 

It certainly could have been a good run, getting away with murder. All I know about SAC is what I read in the headlines. I do know that the hedge-fund business is intensely competitive. I can certainly understand why these guys would want to press the envelope to remain a forerunner.

[SunTrader 10]

Here is an SPX example, admitedly an ideal one, of fib time and price retracements coming together. Both down swings 43 days, 2nd swing 61.8% time retracement of previous up move of 72 days although it overshots bottom by a day. Good enough for govmint work.

 

Then there is 61.8% price retracement of up move. This "missed" hitting exact level by less than 3 points.

 

But was this the cause of the market bottoming - and ripping the bull market higher 300 points ?

 

I don't know but I also don't care.

 

I only care about having probablilites on my side.

 

And fibs are one, of many ways, to do this.

[BlueHorseshoe 10]

For the 100th time...............................................................................:doh:

 

It's because many traders are unsure whether the relevant fib level is 61.8 or 38.2, so they add them together and divide by two to get an average retracement level of 50 . . .

 

:rofl:

 

BlueHorseshoe

[Ammeo 10]

:rofl:

 

Seriously though, we are talking in here about traders, not investors. Important distinction.

http://www.traderslaboratory.com/forums/forex/13692-characteristics-traders-versus-investors-forex-markets-2.html#post156184

etc

 

 

...and when you hear Buffet say: “I realized that technical analysis didn’t work when I turned the chart upside down and didn’t get a different answer,” it's obvious his proclivities and strengths are in playing the monetary system, etc. and it's a good thing for him he didn't try to become a 'trader'.

 

Yes for traders it may do. I personally dont use any technicals for my charting cause the chart looking at the chart is enough to see whats happening with the price, my original perception was the large capital investment market where almost all technicals fail.

[nopac 10]

Well, I posted three weeks' worth of charts that illustrated a method which yielded a 79% win rate and 90% profit, and the resulting NQ trade is now 200pts in profit. That's after several years of profitable trading.

 

But I guess it depends on how one defines "useful".

 

DB,

 

I would really be interested in checking that out. Would you mind telling me where those posts are?

 

thanks a lot

[nopac 10]

Question-

How do you know when a problem is too big to solve for yourself?

When you need someone else to help solve it for you..........?

 

DB has more than 3200 posts over 7 years. I don't have any way of knowing when he made those posts or in which thread.

 

You really think it's unforgivable laziness for me to ask for help finding a needle in a haystack?

 

It's quite possible you're a jerk dude.

[MightyMouse 12]

$14 billion dollar hedge fund with 800 employees which was started in 1992 takes an awful lot of insider info to get to that level and a long time before being discovered - if it was all an illusion and not some substance behind it.

 

Cohen Gets Subpoena in SAC Capital Trading Inquiry - NYTimes.com

 

 

Even Madoff was legitimate for a time if even for a fleeting moment. I suppose too that SAC was legitimate for a period. Likely, a longer period of time than Madoff. But, then the need for yield, the lure of easy money, and uncontrolled pride came together and formed the perfect storm. I know I am convicting him prematurely, but when SAC and RICO are in the same article, it is not good. Rico is generally used with criminal organizations.

[SunTrader 10]

RICO suave hmmm. Yea he's guilty for sure. Throw away the key.

 

Wait, what about me? I went to the same high school (Far Rockaway High) as Madoff.

 

True but just not at the same time. Phew!, might be safe.

[nopac 10]

Question-

How do you know when a problem is too big to solve for yourself?

When you need someone else to help solve it for you..........?

 

DB has 3200 posts over 7 years. I don't have any way of knowing when those posts were made or in which thread they were made. I spent some time searching for them but didn't have any luck. I really don't think I'm being lazy or expecting others to do my work for me.

 

If anybody can direct me to the aforementioned posts, it'd be greatly appreciated.

 

Thanks

[MCM 10]

Given the number of levels, and how far the "bounce" can be from them and still "count", it would be next to impossible not to be successful trading them.

 

Of course, it's also possible to trade successfully by putting on a tinfoil hat and receiving trading signals from Mars.

 

Damn DB...don't give away my system. I am about to open up the Tinfoil Hat Academy of Trading.

[Diva 10]

YertleTurtle gazillion thanks for the clarification. It has made me to dig deeper about Fibonacci Retracement and now has an in-depth understanding on the topic.

[onesmith 10]

Re Static or dynamic

 

 

If moving a data point from a larger timeframe to a smaller timeframe results in converting what might have been dynamic on the larger frame into a series of non updating values for multiple bars then transposing that value to the smaller timeframe assures it is static even if it is dynamic in the larger frame. Any number that remains constant while OHLC are dynamic is going to be static relative to the current timeframe.

 

I appreciate that you gave this idea some thought. It was intended to make everyone think. It's not the subject of numerous other threads. It's been suggested in this thread that there aren't enough ideas filling the void created by running out the scammers. It's also been said we shouldn't be critical of others unless we understand the specific nature of what they're doing.

 

This is my attempt to share an alternative view. It's ok to judge the methods of others and dismiss those methods as weak. When comparing apples to apples, all other things being equal, choose dynamic. Not all horizontal numbers are invalid. But given this is a competitive endeavor why consider anything static?

[tmbaru 10]

Fibonacci analysis has become an essential tool to the modern trader. Some traders may be skeptical regarding the unique and slightly abstract way Fibonacci retracements and extensions analyze the market but ultimately all a trader needs to be aware of is whether they are reliable and accurate.

 

The principle use of Fibonacci retracements and extensions is to project strong lines of resistance and support for a security. Armed with these indications a trader can employ a basic but often successful trading technique by placing pending entries into the market.

 

When deployed properly the Fibonacci retracements and extensions predict significant lines of support and resistance of any security being analyzed. The retracements and extensions are laid over the top of a candlestick chart and if done accurately the resistance and support can be clearly seen. The price of a security is likely to either rebound when it hits one of these lines or pass it and if it breaks the support or resistance it is likely to keep on going. This is valuable knowledge for a trader and with a basic technique large profits can be made by playing the market with this information.

[MightyMouse 12]

The price of a security is likely to either rebound when it hits one of these lines or pass it and if it breaks the support or resistance it is likely to keep on going. This is valuable knowledge for a trader and with a basic technique large profits can be made by playing the market with this information.

 

You might want to rephrase this since your statement can be changed only slightly and provide as much information about price action as the the original version.

 

The price of a security is likely to either rebound when it hits a bunny rabbit or pass the bunny rabbit and if it breaks the support or resistance it is likely to keep on going. This is valuable knowledge for a trader and with a basic technique large profits can be made by playing the market with this information