[fibonacci] Anyone Trade FIBONACCI ?

[marker 10]

Anyone willing to comment on these statements that I have hearing more and more often these days:?

 

-You can make an argument that there is a fib trading level at every single bar on the chart. Take any chart, and draw any fib extensions or retracements, (pick a bar, any bar, pick a swing high/low , any swing high/low) and you will see some bar at any given fib level. Fibs will work after the move has been made. The fib trading method does not work during real time trading. On any given chart at any given time frame, there are a million fib levels...If you trade the fibs, you will over trade and chop your account up...

 

Is there some truth behind this statement? I wish there wasn't, but the more I think about....

[SIUYA 11]

substitute support and resistance for fib and you could probably get the same sort of idea.

If markets are fractal then yes you will always beable to chop everything down further and further. However I am not interested in scalping, short time frame trades, I am more interested in identifying possible swings and entry and exit zones, prior to (not after) the movement.

 

I use fib retracements, or extensions of obvious swings to offer EXTRA visual cues that may offer areas of interesting trade triggers.

eg; a 50-61% retracement of an obvious swing, a 100% extension of what might be a ABC or 123 pattern.

 

Is this used in a hard and fast way? - No

Is this scientific, backtested, 100% reliable? - No

Is this an extra visual cue that alerts me to a possible interesting trading area? - yes

Does this seem to work as a way of offering good risk to reward levels to either enter trades or take profits? - yes

[jashanno 10]

Draw a couple of random horizontal lines on a chart and watch price magically bounce around them like they are important. This sounds to me like what you are running into.

 

With that being said I do think they can be used in a profitable system. The key to it would be to have a huge risk reward ratio and I would use it as confluence for support and resistance. That way you have two things confirming that your entry might be good. I would imagine the accuracy would be terrible though so if you a guy that needs 50%+ then this wouldn't work.

 

I have attached two charts from a trade that I did tonight as an example of what I am talking about. I did not use fib levels in this trade and were drawn after the fact but are there just to illustrate what I am thinking. In fact I don't even know if I drew it correctly because I know nothing about fibs. The blue line was what I determined to be support that turned into resistance and I wanted to take a short on the test of the new resistance. It is at the 38.2% fib level so I feel confident in this area holding. On chart 2 you see where my entry was at and my small stop. On chart 1 you see where I am shooting for the new support level as my exit.

 

One thing that might be frustrating with this is if you try to short 38.2% and then 50% then 61.8%... etc. So you need to find the most important S/R levels and the most important fib levels and only trade those if they both match up.

 

To me the most important level would be 50% (again I know nothing about it). But I think about it like this... lets say you go look at a car and the seller wants $10k. You offer him $9k. He counters w/ $9500.... 50% fib. That may be too simplistic though.

 

I also think what you will find is after awhile the fibs are just getting in your way and all you need is the support and resistance levels.

[jashanno 10]

LOL. SIUYA beat me to it. We basically said the same thing.

 

There's your "confluence" :o

[marker 10]

Seems like there are more traders that agree that fib level are on every single bar on the chart. Take the days chart and just randomly chart fibs, and then you can see you could had made a million entries and exits. The question is, are you willing to put your chips on the line in real time? for me, no way.

[SIUYA 11]

you cant build a house with just a hammer.

 

it can be a useful a tool that can be combined with other tools. I just would not get too caught up with trying to perfect it and use it in a simplistic manner that suits your philosophy of how the market moves and it can be useful.

[SIUYA 11]

you cant build a house with just a hammer.

 

it can be a useful a tool that can be combined with other tools. I just would not get too caught up with trying to perfect it but rather look to use it in a simplistic manner that suits your philosophy of how the market moves and it can be useful.

 

eg; if you like to enter on pullbacks, a 50% or 61% retracement is a good level, or if you like to fade ABC breaks, do it at the 100% level.

 

As soon as anyone thinks they have the answer and can see what no one else can see then it can become a problem. (there are exceptions to this of course )

[marker 10]

  mitsubishi said:

Long time since i posted here but something i been working on again recently is fib time zones.I think traders are so obsessed with PRICE that they forget about TIME.

The biggest reason its so difficult to pick tops/bottoms,good reversal areas is because those price points are often fleeting,particularly on an intraday chart.The perfect entry is there for a few minutes..often only seconds.This is not a problem in itself as many traders prefer to wait for confirmation before entering/closing out.

I think it may have a lot to do with resting orders at certain price levels,and it must be big money there as it takes big money to stop a trend in its track.

However,often,these turns occur at fib time zones which can be anticipated in advance..not predicted..anticipated.

Using Time as well as Price could give your trading an extra dimension and give more confidence of pulling the trigger and capturing the biggest part of the move.If the move then goes as you anticipated,instead of entering at your normal confirmation point,you could pyramid at that point and this is the way a small initial position with a sensible stop can give better returns than you're currently getting.At least that is what i'm finding..fewer trades bigger results,less is more etc.

I will post some examples if there is any interest here

 

 

please do tell...i am interested...thanks!

[TheDude 10]

  mitsubishi said:

Long time since i posted here but something i been working on again recently is fib time zones.I think traders are so obsessed with PRICE that they forget about TIME.

The biggest reason its so difficult to pick tops/bottoms,good reversal areas is because those price points are often fleeting,particularly on an intraday chart.The perfect entry is there for a few minutes..often only seconds.This is not a problem in itself as many traders prefer to wait for confirmation before entering/closing out.

I think it may have a lot to do with resting orders at certain price levels,and it must be big money there as it takes big money to stop a trend in its track.

However,often,these turns occur at fib time zones which can be anticipated in advance..not predicted..anticipated.

Using Time as well as Price could give your trading an extra dimension and give more confidence of pulling the trigger and capturing the biggest part of the move.If the move then goes as you anticipated,instead of entering at your normal confirmation point,you could pyramid at that point and this is the way a small initial position with a sensible stop can give better returns than you're currently getting.At least that is what i'm finding..fewer trades bigger results,less is more etc.

I will post some examples if there is any interest here

 

I'd be interested for sure in the stuff you've been working on. Time does play a crucial part in trading as you say. Indeed, the best prices are only available for a brief amount of time which often only reveals itself in hindsight if we wait for confirmation.

 

I think this is one of the biggies - waiting (time) for confirmation. The more confirmation we wait for, the lower the risk-reward of the trade. Time for sure is just as important as the structure IMO.

 

Thanks,

[Simple 10]

I'll be interested to read you thread mitsubishi.

 

As long as you only start 1 or 2 threads here then you can pretty much setup anything you want to say and attackers will be justifiably shut down. It only the shotgun style thread sprayers who invite attack by their asinine spamming of the site.

[SIUYA 11]

two points ....

"The more confirmation we wait for, the lower the risk-reward of the trade."

 

This actually depends on the time frame being traded..... sometimes, traders do not wait long enough for the best risk reward trades. I think that this applies when trying to really time the market, particularly short term. A lot of trades require more rather than less confirmation in terms of setup, however, once the setup is confirmed, then yes - strike, dont keep waiting.

 

Tom De Mark also uses some timing technique as a tool that looks similar. For me these and the fib numbers can help me keep out of trouble if you like as it helps with context.

I feel all timing and fib levels really add to context as a tool, again, you dont want to believe it will offer the be all and end all solution.

thanks Mitsubishi looks interesting.

[TheDude 10]

Mitsubishi - Thanks very much for your input. Quite fascinating.

 

It got me looking round my chart app which has a load of stuff on it I never use. I did come across this however. I wonder if it's of any use to you and your research....

 

Ensign Software - Tools: Fibonacci Ruler

 

I've attached an example of today's S&P on a 5 min chart. I started the ruler at the high (red arrow) and stopped it at a low (2nd red arrow). As I hope you can see in the attachment (not sure if it's clear), that although the 1.272 was a crock, the 1.61 and 2.0 did indeed have interesting results!

[TheDude 10]

Hi Mitsubishi, you're welcome.

 

Sorry if I'm asking you to repeat yourself, but whats the goal? My understanding is that you are taking a point on the chart (high/low) and seeing if Fib days counting forward coincide with turning days? Is that correct?

 

As regards to 9-11, my thoughts (and this is only opinion here) are that if there is something to these Fib over time results, then they will be useful in normal market conditions. As 9-11 was created by a shock event, the markets move from one of relative harmony/normal conditions, to one of discord and emotion. It is under these conditions that typically, any model will go out the window until the shock is digested and priced in to the market. That can take some time relative to the magnitude of shock - but may be Fib can help us there if we use 9-11 as our starting point, or the low which occurred a few days after. Taleb has written extensively on how these events or black swans as he calls them impact the markets pricing mechanisms.

 

I've attached another chart. This time I have used the Fib Cycles tool on a 10m chart of British Pound futures. As you can see, I have extended the chart forward in time. This should allow us to see how well the Fib Cycles tool can anticipate futre turning points in advance later in the day. Lets hope I remember to post again - probably when the equity market closes this PM.

 

Thanks,

[TheDude 10]

Fairly interesting....

[SunTrader 10]

Although it doesn't cover fib time projections here's a chart showing a 5 wave elliott impulse pattern as well as a simple trendline break covering the eMini from 8:00am Sept 10th through the globex overnight session into the morning of Sept 11th:

[SunTrader 10]

Yes I use EW a good deal but work under the assumption that waves (depending on what timeframe you are looking at) are only present about 50% of the time.

 

Sometimes corrective waves are nothing more than a big mess. So I step aside and wait for a clearer pattern to emerge. Some label every twist and turn with X's and Y's etc.

 

They are the same ones who realize that most everything else (breakouts/indicators/flags/etc) work about 50% of the time but insist EW is always there.

 

I rather be trading than labeling. :thumbs up:

 

BTW here's my S&P500 chart showing impulsive 5 waves up and corrective ABC 3 waves down in progress.

 

Might be that minor wave 5 of major wave C has completed already depending on what happens Thurs/Fri should tell. Minimum time and price levels (compared to wave 2 and 4 of uptrend) have been hit but not for Wave C. Sorry for all the overlined fib levels but I'd have to post multiples charts to spread out the bars to make it more legible.

 

If there is more downside than I am thinking 943-924 zone looks most probable. But I'd like to see a few more trading day's data to narrow the end of wave projection.

[SunTrader 10]

100% time projection high to low and back to a high - miss by one bar:

[Guest BrendanHender]

Canadian stock picks is right here.

[bigsnack 10]

The time element is a very important and noteworthy topic for sure! It's interesting that I have come across this thread just days after noticing (through collecting stats relating to all of my "ideal" trade setups) that 63% of my trade setups occur when the number 8 is the minute. A close second is the number 2, followed by the number 5.

[bigsnack 10]

  mitsubishi said:

Did you get this one?

 

That was one that I didn't take actually. My first confirmation is price (2 tick HH or LL on the ES), and the only "indicator" I use is the NYSE TICK for confirmation of trend direction. Since the TICK was diverging with price I ignored it.

 

I great example of a trade where everything lined up for me is 7:48. Price had just made a LL, NYSE TICK had just made a lower close, and the next 50% pullback touched to the tick at 7:48.

 

EDIT: Although it is interesting to note that the recent low was at 7:58, and then the rejection of the bounce was at 8:02, etc. All day long!!!!

[SunTrader 10]

Here is another chart with time retracement (261.8%) of move from low (point C) to high (point B) plus a 127.2% price external retracement of C-B meeting at swing low.

 

But I have also plotted another way for time cycles measuring high (point A) to high (point B) and projecting forward from low (point C).

 

H-L 11:20am, H-H --> L 11:25am and price retracement missing by a tick.

[bigsnack 10]

  mitsubishi said:

i agree first priority is price,whichever rules your'e using,and like you i don't like /use indicators.With fibs you can project into the future rather than rely on something that lags .I'm trying to give priority to higher timeframes first and not get too distracted with the smaller fib counts- just as you would using something more conventional.Basic 2 problems for us all is staying on the right side of the market and finding the best timing for entries/exits and knowing when you got it wrong.

 

Indeed, getting out of a loser is probably the most valuable lesson that you can learn. I use nearly the same criteria for an exit as I do an entry. Let's say I enter short and the market starts moving in my direction. If price makes a 2 tick higher high above the swing that I entered on, I am out with no exceptions. If it ends up being a fakeout and the trend resumes, then I will see if there is a safe way to get back in. It keeps the stops nice and tight, usually around 2-4 ticks.

[SunTrader 10]

  mitsubishi said:

i been wondering about just using cash rather than futures contract and including overnight/premarket

I use cash (SPX) for generally longer time frames, daily and higher, since ES gets out of whack with adjustment for quarterly rollovers and time decay.

 

But as far as trading off of ES I look at both globex and day session .

[bigsnack 10]

As far as fib retracements go on price, we have a daily and a 15 minute price target below us, but I will be watching for the bounce, especially if either of these targets get hit overnight.

[bigsnack 10]

1043's target for this morning.