Help Needed with Placing Fibs

[januson 10]

Hello

 

I'm trying to learn something about fibonacci retracement lines, but sometimes I get a bit confused.

 

Please take a look at my screenshot, fibs and fibs1. Fibs is without any retracement lines and fibs1 is my confusement :helloooo:

 

I don't get it, how should I draw the fibonacci retracement lines? Or should I even use them in this scenario?

[mister ed 10]

Hi Januson ... I am not really a user of Fibonacci retracements/extensions but plenty of people are. There are some good threads on Fibos, try the ones listed here to start with and they should give you some good ideas:

 

http://www.traderslaboratory.com/forums/search.php?searchid=133324

 

 

Maybe try this thread first, the opening post talks about plotting Fibos between swing highs and lows:

http://www.traderslaboratory.com/forums/f34/fibonacci-pullback-strategies-1057.html

[HAL9000 10]

Hi januson,

 

well, I think that fib1 is nice, but now I'm confused.

 

But lets get serious, as I see it, lets assume you have been looking for a retracement into the 50 to 61.8 % area. Well, it failed! Thats it.

 

So now draw one more; the 0 % line at 566.20 and the 100 % at something like 543.00.

Well, what do you see?

 

Regards,

 

Hal

[HAL9000 10]

Well, janusson,

 

and now draw another one 0 % at 543.00 and 100 % at 566.20

 

I think, that this makes the difference.

 

0 % is the point, where you are, 100 % where you come from.

A 100 % retracement leads you back to the point where the move started,

but you try to analyze it from the end of the move (i.e. start of potential retracement, 0 %).

 

Regards,

 

Hal

[Soultrader 12]

Looks like you are drawing them correctly januson. You can also plot fibs from the swing high (high of day) to the swing low (low of day). You get that nice little retracement around 558 back down to 545.

[HAL9000 10]

Hi James, Januson,

 

maybe I'm wrong, I don't use fibs yet, but regarding to the fib1 example, wouldn't it be right to place the 0 % mark at 566.20 (end of move) and the 100 % mark at 549.06 (start of move)?

 

For example, as result the 61.8 % line should then appear below the 50 % line.

 

Regards,

 

Hal

 

 

P.S.: Maybe my use of you in my above post is somehow misleading, and

but you should try would have been better.

[torero 10]

When you place fib grid, you have to know what you want, a price projection or retracement. Once you've determined that, you have to determine your nearest high and nearest low. Depending on your timeframe and your style of scalping or intraday trading, you can determine if the distance of your target and stop loss to fit in with your style. It look like you did ok on the 2nd chart, using important pivots to place the grid. I usually use 50% most of the time since it's the most reliable.

[Nick1984 10]

I use fibs fairly regularly but only for longer timeframes as I find the retracements to be more more complying on longer time frame so therefore i will use an hourly swing high/low combo or daily swing high/lows. The fib you placed looks fine but personally i'd get rid of the other lines except for the 0, 50, 61.8 and 100. If you were looking to short a rally to the 50 or 61.8 then nothing would of come up but that doesnt matter, not good to chase the market anyhow.

 

Once the market made new lows you can replot the fib and it would of worked as a short

at the gap between the 50 and 61.8. Extensions can be used as profit targets, but I don't personally use extensions.

[BlowFish 10]

Whatever works for you! In all seriousness. If I can quote Tim Morge from medialine (though he was talking mainly about pitchforks). "Draw Draw and then Draw Some More"

 

Normal place is between last swing high and swing low the retracement allowing you to guage the retracement of that swing.

 

On your chart you should draw from the high just before 9.45 to the low bar around 12.45. The current high (just in) should fall at a retracement. The one you drew looks valid but price failed at all levels (notice it did react-at them).

[dandxg 10]

Draw them from swing highs to lows and vice versa. Let me give you a clue that you should find helpful. When the market is pulling back you want to see it pullback on lower volume. Put a volume historgram in the lower section of your chart and verify it for yourself. If you get Tom Obrien's book Timing The Trade or Techniques of Tape Reading by Graifer and Schumacher you will see some good examples of pullbacks on low volume. Fib is related to Elliot Wave. After a confirmed reversal when the trend is strong, you will get a wave 2 pullback to approx. 38% on lower volume and then a break of the swing point on increasing volume. I use 38% and 62%. If it goes below 62% the move is weak and you don't want it. Read this thread, trust me, and print out the pdf photos and thank db phoenix for his wisdom. http://www.elitetrader.com/vb/showthread.php?threadid=29005&perpage=6&pagenumber=2

Edited February 27, 2008 by dandxg
To agument post for the better.

[januson 10]

Thank you all.. very nice comments. So to sum things up, I should move the fibs accordingly as the stock hits lower lows or higher highs.

 

So a fibtrader moves the fibs as the day goes on if needed...

 

But that will eventually means that older support/ resistance gets ignored and replaced by new? Have I missed something here?

 

Thanks for the links

[BlowFish 10]

Essentially Yes. Though of course you have to define exactly what a swing is to you. For a scalper it may be a 5 tick pullback for a broader time frame trader it might be the highest high in the last 5 10 minute bars etc. You have to be consistant and should pick something in tune with exactly what you are trying to measure.

[januson 10]

  BlowFish said:

Essentially Yes. Though of course you have to define exactly what a swing is to you. For a scalper it may be a 5 tick pullback for a broader time frame trader it might be the highest high in the last 5 10 minute bars etc. You have to be consistant and should pick something in tune with exactly what you are trying to measure.

 

Ahh okay.. I think I get it, so put in another way, the stocks essentially wave according to fibs undependendant the timeframe. So if one is looking for daytrades, would the fibs go from day high to day low.

 

I know there's a lot of nuances besides this basic stuff, but things are getting clearer

[james_gsx 16]

Hopefully this helps. There are several trades like the ambush which sometimes work, sometimes don't. I like to plot fibs and use them to find future support/resistance levels. Obviously I use the 127 as an extension to the current trend. So if the market is moving down like in my examples, I make sure the 127 is lower than the current price. If I used something like CL, then I would want it to be higher. I don't trade based off Fib lines, but I do like to know where they are especially on a daily basis.

 

This was from today, and I used the Fib lines during a range to plot where price would go if it broke the low. Notice how the 127 worked out very well for support.

 

 

I went ahead and plotted where the ambush zones would be.

 

 

Heres a closeup of the 61.8 and 127

 

 

Here are some daily charts of the YM and ES. I didn't really include the whole chart because it's rather irrelevant. price is what matters in these examples.

 

 

Now if you are a longer term trader, one could argue this would be the proper fib placement. It really just goes by what your trading plan and style. There isn't really a right or wrong way to do it.

 

 

Heres a shorter term view. I pointed out how the 127 line almost matches up with the open and close of the two candles back in January. I see this come up a lot with Fib lines, and I always find it interesting and it tends to be more powerful.

 

 

This is a weekly ES chart. I threw this one in here for fun, because I could see the market hitting those levels and I find it ironic (or not?) that the 127 nearly matches with the old support levels from 2004!

 

 

 

Hope it helps!