Proving that Fibonacci retracements have an edge...

[bedsit]

very good example bedsit.

From what I can see - you are allowing some 'wiggle' in your interpretation of the fibs. You aren't waiting for a bounce off the exact level.

I can also see that the price made swings that were not off fib levels.

So - whilst I understand people will look at this & say it proves fib levels are significant, I will ask the following:

1 - How much leeway are you giving around the fibs ? You obviously have zones around the fibs, not just a direct hit.
2 - Given this leeway - how much 'coverage' do your fib levels have - what is the total area covered across all fib levels where a swing in that zone is considered a hit ?
3 - What is the ratio of covered to uncovered areas ?
4 - What is the actual probability of a price swing being in one of these area (uncovered vs covered) ?
5 - How many swing highs/lows are there in your chart ?
6 - How many swing highs/lows are in a fib zone?
7 - How do these proportions compart to actual coverage of fib zones ?

The eyeball fails us when we are expecting to see something. When I look at the picture, I do not see the significance others see. Probably because I am argumentative.

Hi DT.

Sorry - I didn't put any explanation with the attachment.

I use Fibonacci levels on different time frames in different ways. I used this example to get an idea about the target - (the circles only show how the price behaved around different levels).

I prefer to pay more attention to the practical side, rather than to Fibonacci levels' discussions i.e. if one makes regular profit from them, why not.

 

[HowardCohodas]

This thread reinforces something that I have observed with some frustration on T2W. It is impossible to "prove" anything, even within sensible limits of uncertainty to this audience. And most of the negative comments are without factual basis, incoherent or both.

And so it goes.

 

[scose-no-doubt]

Depends on what you perceive as negative, Howard.

 

[HowardCohodas]

Depends on what you perceive as negative, Howard.

I'll give you that. Adding the adjective "negative" did not add value to my point.

Therefore:

And most of the comments are without factual basis, incoherent or both.

 

[Splitlink]

This thread reinforces something that I have observed with some frustration on T2W. It is impossible to "prove" anything, even within sensible limits of uncertainty to this audience. And most of the negative comments are without factual basis, incoherent or both.

And so it goes.

Howard,

The older you get the more the sensation hits you, "Been there, done that"! or, if you haven't done anything, you've heard it all before.

Now you made me press a "Sell" button

 

[SanMiguel]

This thread reinforces something that I have observed with some frustration on T2W. It is impossible to "prove" anything, even within sensible limits of uncertainty to this audience. And most of the negative comments are without factual basis, incoherent or both.

And so it goes.

even if you had the stats, someone would probably reply "I don;t believe in all that golden ratio crap"
It is difficult to alter personal beliefs - people need to prove whatever they want to themselves.

 

[Shakone]

I'll give you that. Adding the adjective "negative" did not add value to my point.

Therefore:

And most of the comments are without factual basis, incoherent or both.

I skimmed the thread, so I haven't seen many comments that are incoherent. Are people writing in another language or something? But for the others, you're unlikely to get any factual analysis of any quality anyway. Because as I mentioned, if you want to study Fib retracements, you have to have a non-arbitrary way of drawing them. And then a non-arbitrary way of judging whether they 'worked' or not. And then apply stats to that.

Take bedsit's chart for example. Fib extensions from the upswing from early march to early april. It looks nice. But there was an upswing from early feb to late feb, what about those extensions? And lots more upswings afterwards that we could draw extensions from. So how long do we keep just one fib extension, until the 261.8 has been hit or the 161.8?

And the other problem with retracements is that they are often drawn after the fact for analysis, when the top or bottom has established itself. Then you have a 38.2, and a 50 and 61.8. But in real time, you don't know where the top is, so you have to consider all the other retracements that maybe worked or maybe failed that were generated before that top or bottom. It's all very messy to do, but good luck if you can do it.

 

[HowardCohodas]

if you want to study Fib retracements, you have to have a non-arbitrary way of drawing them. And then a non-arbitrary way of judging whether they 'worked' or not. And then apply stats to that.

We are in violent agreement.

The client I am working with, in fact, has a non-arbitrary way of applying them and a statistically sensible way of evaluating their effectiveness.

And so it goes.

 

[HowardCohodas]

even if you had the stats, someone would probably reply "I don;t believe in all that golden ratio crap"
It is difficult to alter personal beliefs - people need to prove whatever they want to themselves.

I keep forgetting that a not insignificant percent believe we never visited the moon.

And so it goes.

 

[DionysusToast]

I'll give you that. Adding the adjective "negative" did not add value to my point.

Therefore:

And most of the comments are without factual basis, incoherent or both.

Why not be specific and argue against the points made then?

You are actually contributing to the problem you are complaining about. If you want to claim that comments are without factual basis, why not point out which comments you are referring to and state why you think your perception is correct?

 

[bedsit]

I've found it useful as one of very few leading indicators. It's not 100% accurate, but if drawn properly it has a high rate of success. Through my experience it works nicely with EJ and I use it for my trading decisions combined with some other indicators.

 

[DionysusToast]

I skimmed the thread, so I haven't seen many comments that are incoherent. Are people writing in another language or something? But for the others, you're unlikely to get any factual analysis of any quality anyway. Because as I mentioned, if you want to study Fib retracements, you have to have a non-arbitrary way of drawing them. And then a non-arbitrary way of judging whether they 'worked' or not. And then apply stats to that.

Take bedsit's chart for example. Fib extensions from the upswing from early march to early april. It looks nice. But there was an upswing from early feb to late feb, what about those extensions? And lots more upswings afterwards that we could draw extensions from. So how long do we keep just one fib extension, until the 261.8 has been hit or the 161.8?

And the other problem with retracements is that they are often drawn after the fact for analysis, when the top or bottom has established itself. Then you have a 38.2, and a 50 and 61.8. But in real time, you don't know where the top is, so you have to consider all the other retracements that maybe worked or maybe failed that were generated before that top or bottom. It's all very messy to do, but good luck if you can do it.

You are of course, totally correct.

We could learn a lot from some of the sciences. People that test drugs have known for years that their own internal bias can impact the outcome of the tests they perform. As such, they are much more rigorous in their examination of a hypothesis.

What you see in the trading world is positive testing mostly - setting out to prove something works. If you want to proves something works, you'll probably do it as this is your goal.

All traders should read De Bono in my opinion. There's a few other books that point out the flaws. Amongst many - "Black Swan", "Lecturing Birds on Flying" and "A mathematician plays the market" spring to mind.

If nothing else, it is very interesting to understand your own internal bias.

 

[HowardCohodas]

Why not be specific and argue against the points made then?

Hmmm. I posted a link to the essence of why it might be a rational approach. And I suggested a simple use of the search engine. And I stated that I had a successful client applying this approach.

"You can lead a horse to water, but you can't make him drink."

 

[DionysusToast]

Hmmm. I posted a link to the essence of why it might be a rational approach. And I suggested a simple use of the search engine. And I stated that I had a successful client applying this approach.

"You can lead a horse to water, but you can't make him drink."

Why ????? Might be ???? Lordy !

Howard - perhaps you are unaware of how a debate works in the internet environment.

If you have an idea - please put it forward.

If not - if you just want to point to someone else's research without adding something yourself, then you are rather missing the point.

Cut and paste, linking to someone else's work is really not putting your own view or experiences across is it? You are hardly going to win an argument by stating someone else's opinion.

We all know were Fibonacci comes from but it is what we personally contribute to an argument that makes it an argument.

Unless of course, you know how to get 2 hyperlinks to disagree with each other.

Cut & paste at dawn ?

 

[HowardCohodas]

All traders should read De Bono in my opinion. There's a few other books that point out the flaws. Amongst many - "Black Swan", "Lecturing Birds on Flying" and "A mathematician plays the market" spring to mind.

If nothing else, it is very interesting to understand your own internal bias.

Or you might try reading "Design, Testing and Optimization of Trading Systems" by Robert Pardo.

Using a known flaw in most investigations due to internal bias is no reason to dismiss ideas that just may be the result of experiments designed to avoid these flaws. Just a thought.

 

[DionysusToast]

Howard - I guess I could read another book but that's one I already read.

Now - would you like to relay your own experiences with Fibonacci and your thoughts on Fibs vs random lines ?

Perhaps you can comment on what you see in bedits image and my response to it.

Or would you like to dance some more ?

 

[HowardCohodas]

Why ????? Might be ???? Lordy !

Howard - perhaps you are unaware of how a debate works in the internet environment.

I don't know of any environment, including the internet, where opinion stands in for facts in a debate. Not pointing out resources that contradict opinion leading to poorly informed readers believing things that aren't so does no one any service.

When I have original research to back up my claims, I can make the case myself. When others have done the research and I have not, I do them and the readers the courtesy of linking to original material. When original material is more than plentiful, I suggest use of a search engine.

 

[HowardCohodas]

Howard - I guess I could read another book but that's one I already read.

I believe you introduced books to support your claims. I offered a more complete view of the flaws you were trying to use as a justification of your point. If you read it already, I am troubled by the lack evidence in your comments that you understood it.

 

[DionysusToast]

I don't know of any environment, including the internet, where opinion stands in for facts in a debate. Not pointing out resources that contradict opinion leading to poorly informed readers believing things that aren't so does no one any service.

When I have original research to back up my claims, I can make the case myself. When others have done the research and I have not, I do them and the readers the courtesy of linking to original material. When original material is more than plentiful, I suggest use of a search engine.

So - In a nutshell, you have nothing personally to add to the topic.

OK - got it.

I presume then, that you are currently revising for your speed typing certificate and are therefore trying to get as much practice in as possible.

 

[HowardCohodas]

Now - would you like to relay your own experiences with Fibonacci and your thoughts on Fibs vs random lines ?

Perhaps you can comment on what you see in bedits image and my response to it.

I've done research all my life. During my eclectic career, I've had three gigs at Research centers of two different Fortune 500 companies. I've published internal papers on my work that have been peer reviewed before being accepted.

My experiences are irrelevant. When I see claims and opinion contrary to what my research shows, I think it important to point it out. There are many readers here too naive or unskilled at doing the research. It is unfair to leave them so badly misled.