Fibonacci Retracement Levels

barjon

Legendary member
10,602 1,741
Hi everyone,

As a new boy to T2W can I ask if anyone makes much use of Fibonacci retracement levels?

I have found that candlestick reversal indicators occuring at 50% retracement level are very reliable, about 65%, although not necessarily to the degree that gives a significantly profitable trade.

Sufficient though for me to double my normal trading size when a swing high (low) is associated with a candlestick reversal indicator at around the 50% retracement level.

I'm not sure why the 50% retracement works so well as resistance (support). Maybe it's something to do with supply and demand theory being the point at which the number of buyers and sellers should be equal. Any thoughts?

Jon
 

Trader333

Moderator
8,591 922
Hi Barjon,

You will find that the T2W member known as "Naz" , (who is a professional trader of the Nasdaq stocks), is a big user of Fibonacci Retracement Levels. There was a thread where he gave examples of how he had used it but I cannot find it anymore. Does anyone know what happened to it ?


Paul
 

options

Senior member
2,374 218
Nope, can't find that thread either.
Fibs do work resoundingly well for me though. Used with volume trends and your own sup and res and you can't go far wrong in my view.
 

Skimbleshanks

1
2,325 16
Ages ago I bought a book entitled 'The trading rule that can make you rich'. I bought it via the Internet so didn't have the pleasure of finding out what the 'rule' was before I bought it; had I known I would not have bought it obviously!

The rule was that markets often retrace 50% of a major move - all 67 pages were devoted to this. The book was aimed at commodities rather than stocks, and I must admit that although I rarely use fibonacci retracements anymore, the one I do slap on a chart for a laugh is the 50%, and it does indeed work surprisingly well.

I doubt that the Naz thread Trader333 and Options refer to has been pulled; it probably is there somewhere in the murky depths, perhaps disguised as the thread titles are often quite disparate from the main discussion contained within them.
 

barjon

Legendary member
10,602 1,741
:LOL:

Thanks to everyone - particularly riddle for plumbing the depths.

Good hunting folks!!

Jon
 

Maverick27

Newbie
6 0
Fib. Retracement levels

Hi,
I'm finding it extremely difficult in knowing which level will hold in Fib. Retracements !
I've seen on the charts that prices reverse midway between 50% & 61.8% sometimes.
Price can under shoot or over shoot a Fib. level. Can somebody pls. give me few tips/helpful advice on this subject matter ?!
Do we look for Trend Reversal patterns @ Fib. Levels or can we incorporate few simple indicators to help determine probable price turning points etc,etc..

I've read about Donchian Channels , pls. enlighten me !

Thanks, Mave
 

dbphoenix

Legendary member
6,952 1,251
General rule of thumb I find is that anything sub 1 hour is all noise, and that goes for fibos as much as anything. No-one cares about poxy 5 min charts, and what might appear to be the greatest chart pattern ever on one of these simply doesnt show up on a longer timeframe chart (as used by the larger players). The analogy I have used in the past is a supertanker not noticing a dinghy and running it over. When I'm selling a billion dollars, if the level looks right to sell on my hourly, daily, weekly charts etc, I don't pause before I pick up the phone and go 'oops - gotta look at the 5 minute chart just in case there's a fibo there'
On the other hand, they aren't likely to wait for a ihr bar to "close", either, before taking action. When price reaches a point where it's time to buy, buy. Or sell. Or short. Which is why I use 1m charts. :)
 

dbphoenix

Legendary member
6,952 1,251
Fair enough, each to his / her own. I merely meant that the kinds of moves associated with the majority of people trading off those very short term charts are likely to be wiped out if something larger is afoot. Combine that with higher spread costs associated with trading very short term / high freq and it always seems like a losing game in the long run to me, as well as lulling one into a false sense of security if it does initially go well.

Just my $0.02

GJ
All "larger" moves, however, begin with "smaller" moves. The key is to determine when the move is underfoot.

And trading off a 1m chart does not necessarily mean high frequency. I traded once yesterday, at resistance, and held all the down, for hours. I rarely trade more than twice a day. Sometimes not at all.
 

firewalker99

Legendary member
6,655 600
General rule of thumb I find is that anything sub 1 hour is all noise, and that goes for fibos as much as anything. No-one cares about poxy 5 min charts, and what might appear to be the greatest chart pattern ever on one of these simply doesnt show up on a longer timeframe chart (as used by the larger players).
You're right: anything that shows up on these smaller time frames disappears on the larger timeframe. Strangely enough, for that reason, I've found anything higher than 1 hour to hold little meaning to me. I can't get a good understanding of it, unless I really zoom out to say a weekly chart or something like that. But that's more of use for medium to long-term investing than for short-term trading.

Anyway, I disagree about it all being noise. In fact, on some days I am astonished at how price reacts and is attracted to certain 'points' in a 'predictable' kind of way. I guess it's only a matter of finding order in the chaos...
 

dbphoenix

Legendary member
6,952 1,251
But maybe the chart points on your 5min chart or whatever that the market is continually being attracted to, if it happens often enough intraday, will also show up on the hourly chart.

And even when that's not the case, I'm not saying that it never happens on short term charts, just that i) Cause and effect is imho tenuous to nonexistent and ii) leading on from this, because big money won't respect those levels (as they simply won't see them) there is statistically, over the long run, less chance of them constituting meaningful S/R

Make sense? (even if you still diasgree, as is your absolute prerogative of course) ;)

GJ
If "big money" doesn't see those levels, then why are they moving price at those levels?
 

dbphoenix

Legendary member
6,952 1,251
Are you playing devils advocate here?
Not intentionally. Here, for example, is what happened when price hit R on the NQ this morning:



I suppose retail traders alone were responsible for this rejection of R, but, at the time, I was interested only in the selling, not in who was responsible. For me, whoever was selling was "smart", retail or not.

.

.
 
Last edited:

firewalker99

Legendary member
6,655 600
Not intentionally. Here, for example, is what happened when price hit R on the NQ this morning:



I suppose retail traders alone were responsible for this rejection of R, but, at the time, I was interested only in the selling, not in who was responsible. For me, whoever was selling was "smart", retail or not.
Talk about zooming in, is that a 10-second chart?
So did you exit on the flat volume consolidation around 1737.50 ?
 
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