Fibonacci without Elliot Wave?

[dmedin]

I originally thought you could use Fibonacci lines like support/resistance.  But that doesn't seem to be the right approach.  What's the advantage of using Fibonacci without also applying Elliot Wave Principle ideas regarding lengths of waves?

So the simplest rule is you measure from bottom to top and if price comes back 23.6 - 50% before going back up again then you buy?  Is that really effective?  It doesn't seem like it is.  🤔

[oxygen4life]

You can use it with basic trendlines for extra confirmation, e.g. in an uptrend if the price is getting close to the trendline and is also at the 61.8 fibonacci retracement level (from last LL to last HH) a lot of buyers will take this opportunity.

[dmedin]

PRT can draw S/R for you ... why not just leave it to the machine?

[oxygen4life]

3 hours ago, dmedin said:

PRT can draw S/R for you ... why not just leave it to the machine?

Because I believe I can do better than a bot when it comes to drawing trendlines and S/R... Just looking at your chart I can tell I would have drawn the lines at different levels.

See the support at 12876.9 for example. That is NOT a good support in my opinion, the system just drew a line at the latest lower low. A good support would be at 13000, because the price bounced 5 times (once as a resistance then 4 times as a suppport), and it is a psychological level (round number). Same with the line connecting the highs, it just connected the first high to the latest high, ignoring all the action in the middle.

Finally, I don't trade the daily. The system is even worse on lower timeframes.

[Caseynotes]

you are both right because support and resistance supply and demand should really be thought of as zones rather than rigid lines. These zones are areas where you suspect many orders will be waiting and it's unlikely everyone will pick the exact same price level, some will want execution a bit earlier, some a bit later, that's if there are any at all.

[oxygen4life]

I'd rather use lines, but think of my lines like the center of your zones, because it doesn't matter for me if the price doesn't bounce exactly on it. I think zones are great but I want my daily levels on the chart when I trade small timeframes and zones would just paint the M5 screen black when trading within it. For example for the 13000 level we discussed, if I was trading it I would wait to see a reversal signal on H1/M15/M5 timeframes to enter the trade, doesn't matter if the price goes a little lower.

Edited February 16, 2020 by oxygen4life

[dmedin]

5 hours ago, Caseynotes said:

These zones are areas where you suspect many orders will be waiting

Surely the big money interests know that there will be many traders looking to buy retracements and will use that knowledge to give fake signals ... that's what I can see when I use Fibonacci to trade.

Fibonacci is only ever useful when used in hindsight and you deliberately manipulate it to line up with certain historical price points.  😞

 

Edited February 16, 2020 by dmedin

[oxygen4life]

9 minutes ago, dmedin said:

Fibonacci is only ever useful when used in hindsight and you deliberately manipulate it to line up with certain historical price points.  😞

 

If Fibonacci wasn't profitable it wouldn't be used so widely. It is a great tool in trends on ANY timeframe, I've seen people be profitable using it on the 100-ticks chart. You were talking about Eliott waves on the first post, its principles are 100% based on Fibonacci and traders with 30 years of experience use it daily.

[dmedin]

9 minutes ago, oxygen4life said:

You were talking about Eliott waves on the first post, its principles are 100% based on Fibonacci and traders with 30 years of experience use it daily.

Yes, my question is, can you really just draw up Fibs or do you have to use them in the context of an EWP pattern system(which is pretty much inaccessible for most people).

[dmedin]

In this example I just went long because it stopped making a pattern of lower lows and lower highs, and the MAs aligned (in fact they were aligned at the morning star/bullish Doji that bounced off the 50 SMA).

 What is the use for Fibonacci, unless you are thinking this is a retrace rally in which case you would use the Fibonacci extension?  How is that better than straightforward 'Dow Theory' and using trailing stops to lock in profits?

 

Edited February 16, 2020 by dmedin

[dmedin]

Here's DailyFX using a Fibonacci extension for DJIA.

 

[dmedin]

And here's a really excellent one, with every possible S/R imaginable.  He's sure to catch at least one of them!

[oxygen4life]

FIb is used to get the information where the price will pullback before continuation of the trend, not for trend reversals. Fib retracements can be used with basic trendlines, Fib extensions is a bit more advanced as its target vary depending on which Elliott wave you're currently on. I wouldn't use extensions without Elliott.

In your first example as you broke the trendline you need to look at the bigger picture. If the higher timeframe is in a downtrend too, look for an ABC pattern on this timeframe, and a Fib retracement on the higher timeframe from HH to LL to know where it could pullback.

[dmedin]

I love the idea of fractals and waves within waves, but it's just more than I can deal with.  Simpler is better ...

[oxygen4life]

40 minutes ago, dmedin said:

I love the idea of fractals and waves within waves, but it's just more than I can deal with.  Simpler is better ...

I agree, I like to see in which wave I am but sometimes it even induces you in error and you really don't need it to be profitable.

[dmedin]

Here are two Fibs drawn up.  The first one does not look right at all.  You could say that's five waves up with an extended fifth followed by 'one heck of a complex correction'.  If so, the first one has the Fib drawn from the start of wave 1 to the top of wave five.  So there's another a second chart with the Fib drawn from the bottom of wave four and it looks better.  Right?  So you'd look for it go retrace down to 7526?

[oxygen4life]

Fibonacci only works in trending markets. Fibonacci correctly predicted the 2017 pullback as it was trending upwards, however the market started ranging afterwards with no clear direction. Bollinger bands are better suited for ranging markets.

[dmedin]

1 hour ago, oxygen4life said:

Fibonacci only works in trending markets. Fibonacci correctly predicted the 2017 pullback as it was trending upwards, however the market started ranging afterwards with no clear direction. Bollinger bands are better suited for ranging markets.

Like this?

 

Edited February 17, 2020 by dmedin

[dmedin]

Better one

[dmedin]

[oxygen4life]

I'm confused as to what you are trying to achieve there. Are you using extensions ? With which 3 points ? I don't get the same results.

[dmedin]

Yes it's an extension, here are the points (wave 1 to wave 3, down to wave 4, projection for wave 5)

 

Edited February 17, 2020 by dmedin

[dmedin]

Slight adjustment

[THT]

Hi - Late to the thread!

I use Fib and 8ths in my analysis - not for predictive ability but just to see if the market is making moves that are near key natural mathematical  laws/ratios

I've never found acceptable predictability in Fib retracements or Extensions for my style

I've spoken personally to many of the worlds top Fibonacci traders and asked them outright which is the next key level exactly that will be hit and stops the market dead - none of them can say with certainty - that was enough for me to stop investigating further way back in 2010.

Thomas Bulowski has tested hundreds of methods out there on his site he lists the probability of those methods, here's the links to Fib retracements:

http://thepatternsite.com/fib.html

http://thepatternsite.com/FibonacciTargets.html

[dmedin]

10 minutes ago, THT said:

I've never found acceptable predictability in Fib retracements or Extensions for my style

Elliot Wave is attractive because it offers a way to describe and view wave structure, the Fibs on their own don't really help

[THT]

Same response for EW - I studied it for a long time - I think and this is from memory it'**** rate was 50% ish - a coin toss has a 50% hit rate.

the main EW firm have been calling wave 5 of 5 since 1986, which means that for 34 years their assessment of the overall S&P500 has been wrong, I remember in 2003 them calling for massive lows and again in 2009 - If it worked perfectly it would be really useful - once you start labelling swing highs and lows you mentally submit to being right on them

 Best Information I've ever come across is from WD GANN from 100 years ago

[dmedin]

50 minutes ago, THT said:

If it worked perfectly it would be really useful

If it worked 51% of the time it would be enough to be profitable.

[THT]

True

[dmedin]

Once again my mind cycles round to this idea of understanding wave structure and how Fibonacci ratios aren't useful on their own.

But then I open up that book by Precther and Frost, and then I remember why I didn't go any further with EWP.

[THT]

6 hours ago, dmedin said:

Once again my mind cycles round to this idea of understanding wave structure and how Fibonacci ratios aren't useful on their own.

But then I open up that book by Precther and Frost, and then I remember why I didn't go any further with EWP.

EWP does NOT work  - They've been calling for a top and decline to near 0 since 1986!!!!!

Certain things in EWP do work though and can be used to profit from the markets

Again there's a massive myth about Fib Rets and Ext's - sometimes they work, often they don't, that in itself tells you something is amiss - but again they can be used to profit from the markets

I would look at the 50% ret level which is not a fib level, its a gann level - Hence why the market came to a smack bang stop around that level in the 1960's, 70's, 2003 and 2009

If all you ever did was trade Elliott Wave 2's which are in fact Gann's Secondary reactions (gann wrote about them 1st) you do rather well