Article Fibonacci Retracements on the Mini Dow

[T2W Bot]

Fibonacci Retracements ? A Precision Trading Strategy Deciding on a topic for this article, I reviewed the top ranked articles in T2W and found some fantastic material. I did not however find inspiration for a new article idea that readers may like. Perhaps strangely, I then looked at the lowest rated articles. I noticed that two of them discussed Fibonacci which both surprised and intrigued me. It was not necessarily that people did not like Fib, just that perhaps it had not been explained well enough for their liking. I am a huge Fibonacci fan and it plays a big part in my trading so the following will explain how I use it to trade successfully.
While this strategy can be applied to almost any market, I will focus on the Dow Jones e-mini future, with all screenshots been the mini-Dow, (symbol YM) 1 minute charts.
Fibonacci ? Is it really so subjective? No! Not once you know how to use it correctly. There is a precise place where lines should be drawn and many...

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[rols]

This is a forum thread for discussing the Knowledge Lab Article, "Fibonacci Retracements on the Mini Dow".

This is a well written article.

The only thing it doesn't mention is the slightly important fact that old Leonardo of Pisa was an eleventh century mathematician who used the Fibonacci sequence (which incidentally wasn't his invention) to solve a problem concerning the population of rabbits.

Rabbits bonking to trading the Dow Jones e-mini could be described as a quantum leap.

 

[dick_dastardly]

I've noticed that every once in a while the debate about fibs pops up here on t2w.

Non-believers will say something like

" fibo traders are just kidding themselves and making fibs fit in hindsight "

or

" there's so many fib levels that price is bound to turn at or near one of them "


Whilst supporters will come back with something like

" Look ! here's a chart, that fib there is a near perfect xx fib, how can it be coincidence ? "


Everyone seems to be arguing if they exist but no-one seems to want to say why they exist.

Those that subscribe to fib theory will say that fibs occur at this level or that level but they never seem to actually explain why they believe fibs occur at 38.2% or 50% or 61.8%.

Is it just they've seen retraces unfold to the same levels over and over again that they blindly accept these levels exist without knowing the reasons why or is there some underlying process/mechanism that fibo fans believe to be at work ?



dd

 

[Splitlink]

I've noticed that every once in a while the debate about fibs pops up here on t2w.

Non-believers will say something like

" fibo traders are just kidding themselves and making fibs fit in hindsight "

or

" there's so many fib levels that price is bound to turn at or near one of them "


Whilst supporters will come back with something like

" Look ! here's a chart, that fib there is a near perfect xx fib, how can it be coincidence ? "


Everyone seems to be arguing if they exist but no-one seems to want to say why they exist.

Those that subscribe to fib theory will say that fibs occur at this level or that level but they never seem to actually explain why they believe fibs occur at 38.2% or 50% or 61.8%.

Is it just they've seen retraces unfold to the same levels over and over again that they blindly accept these levels exist without knowing the reasons why or is there some underlying process/mechanism that fibo fans believe to be at work ?



dd

Fibs are no different to the bell curve in the fact that they show, over a period of time, where the maximum number of trades have taken place. It all comes down to the main decision to be made, Which way is the trend direction? Get that right and you are home and dry. The bell curve, as in Market Profile, will get you into the market on the correct side if you know that direction.

Fibs are no different. Get it wrong and that is that. Have tight stops.

If statistical data gives more accurate readings, the larger the population, with a recommended minimum of 100, why should a Fib reading covering 20-30 bars give accurate readings? I can't see it, but people draw these Fib lines everywhere they see a trend, regardless of how many bars there are.

Split

 

[darktone]

What I like about fibs are they give a black and white level to act on in the smaller time frames. Notice this guy is using them on 1 min charts! Id have thought that utter madness at one point! Not so sure anymore. Gauge direction from larger time frames, (d /4hr / 1hr). Use the smalls when the PA lines up (1min / 5 min) and fibs to take position. Use (d /4hr / 1hr) to run position.

You can get some serious size on this way and providing you use tight MM risks can be kept in check.

I dunno about all this 61.8 being the formula for the universe stuff! But its 61.8% better than trading the BO!

 

[Splitlink]

What I like about fibs are they give a black and white level to act on in the smaller time frames. Notice this guy is using them on 1 min charts! Id have thought that utter madness at one point! Not so sure anymore. Gauge direction from larger time frames, (d /4hr / 1hr). Use the smalls when the PA lines up (1min / 5 min) and fibs to take position. Use (d /4hr / 1hr) to run position.

You can get some serious size on this way and providing you use tight MM risks can be kept in check.

I dunno about all this 61.8 being the formula for the universe stuff! But its 61.8% better than trading the BO!

They are more likely to be accurate with 1' bars than with longer time frames because there are more bars in the time period that he is, probably, using. 60 per hour, for example- It is, also, likely to wipe out the after hour trading period, which is useless, anyway.

How many people include the overnight period in their Fib lines? A lot. I bet. What happens during the night gives a strong bias to the calculation, IMO, but nevertheless some traders will draw, on an hourly chart, a Fib line covering several overnight periods which are, simply, wrong because no trading was done.

I'm not an expert on this and could be wrong about what I have said but a bit of thought has decided me against using them. Far better to draw in your own RS lines.

Split

 

[darktone]

They are more likely to be accurate with 1' bars

More accurate!? hmm. Just more of id say.

It is, also, likely to wipe out the after hour trading period, which is useless, anyway.

The thinking i put forward is to attempt entries when smalls are running in the same direction as your main tfs. Ie Your market is downtrending! Your hour chart has retraced to the previous 4hr high and is starting to show weakness. Then may be a good time to attempt getting size into a short via the smalls.

How many people include the overnight period in their Fib lines? A lot. I bet. What happens during the night gives a strong bias to the calculation, IMO, but nevertheless some traders will draw, on an hourly chart, a Fib line covering several overnight periods which are, simply, wrong because no trading was done.

Stocks yes..Fx no. But i was suggesting only using in the smalls anyway. To be fair i cant see the use for fibs in the larger TFs (in general).

Far better to draw in your own RS lines.

S&R Rules!!

 

[Dentalfloss]

excellent article.the explanation is clear and there are no if and buts.the bravo.lets have some more articles like this

 

[fibonelli]

A very clear and concise article on how to correctly apply the fibonacci retracement tool. Also good to see the importance of confluence and of techniques to determine the probability of a trend continuing in the article.

 

[nkruger]

Good article Nick. Clear and concise explanation. If you newbies out there are designing a trading system, consider using this.

 

[flylife]

Excellent article and very good explanation

 

[rstackman]

Very well written, concepts clearly explained. Take the time to read this article. Thanks.

 

[JC1]

Very good article, 'precisely' explains the con cept of fibs and its correct usage. Well done Nick!

Look forward to your article on Pivot Points - soon.

 

[Daniel Lummis]

Fantastic.

 

[Valfar]

Hi. Should't it be "point B" in "the only place to do it would be with the uptrend from the last LL up to point A" in page 2? Sorry if I missunderstand. I've been in the market for 5 days.

LE. "point A" is correct because "Within an UP trend, you MUST always draw your Fib line starting from the most recent low and finishing at the most recent high". Got it.