Fibonacci

[LiboNZT]

I've been reading Steve Nison's candles lately and just today I've reached chapter 12 which talks about retracement levels. Although I am somewhat familiar with Fibonacci, I can't really understand all the fuss about 68%, 32% or 50% retracements. Is this an empirical obervation made over time regarding price action? Or do prices behave that way only because traders and the public in general ,have made that method so popular that they subconsiously gave value to something that might probably didn't have any relation at all with the stock market? I am aware that fibonacci numbers, ratios etc have been observed almost everywhere in nature but I can't understand how they could actually appear in the stock market aswell and why. The only possible, though vague explanation, i can give is that it has something to do with the time horizon each individual is willing to keep his position or manage his profits/losses. Does The time horizon along with the expected profits/losses of individuals, cumulative produce retracement patterns which fuel further similar patterns? I haven't searched extensively on the subject, though a quick search in google didn't actually give me any answers. Unluckily, my resources don't include any extensive remark on fibo so I am a little lost there. If anyone could provide me with his opinion I would be grateful! Plus some footnotes in order to get me started or any resources explaining in depth Fibonacci and retracement levels would be more than helpfull. Thanks in advance!

 

[malaguti]

I've been reading Steve Nison's candles lately and just today I've reached chapter 12 which talks about retracement levels. Although I am somewhat familiar with Fibonacci, I can't really understand all the fuss about 68%, 32% or 50% retracements. Is this an empirical obervation made over time regarding price action? Or do prices behave that way only because traders and the public in general ,have made that method so popular that they subconsiously gave value to something that might probably didn't have any relation at all with the stock market? I am aware that fibonacci numbers, ratios etc have been observed almost everywhere in nature but I can't understand how they could actually appear in the stock market aswell and why. The only possible, though vague explanation, i can give is that it has something to do with the time horizon each individual is willing to keep his position or manage his profits/losses. Does The time horizon along with the expected profits/losses of individuals, cumulative produce retracement patterns which fuel further similar patterns? I haven't searched extensively on the subject, though a quick search in google didn't actually give me any answers. Unluckily, my resources don't include any extensive remark on fibo so I am a little lost there. If anyone could provide me with his opinion I would be grateful! Plus some footnotes in order to get me started or any resources explaining in depth Fibonacci and retracement levels would be more than helpfull. Thanks in advance!

Its more a self fulfilling prophecy if you ask me. I certainly dont trade with any of the retracement or extensions in mind. Most times price will react off it, and then just carry on merrily ignoring it. Of course you will find loads of examples where it works perfectly, and thats what sells the concept. cherry picked examples.
wow I feel like the Grinch today..bah humbug

 

[LiboNZT]

Its more a self fulfilling prophecy if you ask me. I certainly dont trade with any of the retracement or extensions in mind. Most times price will react off it, and then just carry on merrily ignoring it. Of course you will find loads of examples where it works perfectly, and thats what sells the concept. cherry picked examples.
wow I feel like the Grinch today..bah humbug

Self fulfilling prophecy was the word I was searching for. You got my point exactly! Thanks for the info!

 

[Vicorka]

After observation history, Fibonacci theory assumes that at 68%, 32% or 50% retracement most humans (in our case traders) psychophysically are willing to cut losses or fix profit. Furthermore, at these levels a trend is predisposed to changes. If no changes occurs, the theory states that most humans will be ready to wait for next critical level.

 

[Joules MM1]

After observation history, Fibonacci theory assumes that at 68%, 32% or 50% retracement most humans (in our case traders) psychophysically are willing to cut losses or fix profit. Furthermore, at these levels a trend is predisposed to changes. If no changes occurs, the theory states that most humans will be ready to wait for next critical level.

ok, that's interesting, thanks....

 

[MoeD]

I've been reading Steve Nison's candles lately and just today I've reached chapter 12 which talks about retracement levels. Although I am somewhat familiar with Fibonacci, I can't really understand all the fuss about 68%, 32% or 50% retracements. Is this an empirical obervation made over time regarding price action? Or do prices behave that way only because traders and the public in general ,have made that method so popular that they subconsiously gave value to something that might probably didn't have any relation at all with the stock market? I am aware that fibonacci numbers, ratios etc have been observed almost everywhere in nature but I can't understand how they could actually appear in the stock market aswell and why. The only possible, though vague explanation, i can give is that it has something to do with the time horizon each individual is willing to keep his position or manage his profits/losses. Does The time horizon along with the expected profits/losses of individuals, cumulative produce retracement patterns which fuel further similar patterns? I haven't searched extensively on the subject, though a quick search in google didn't actually give me any answers. Unluckily, my resources don't include any extensive remark on fibo so I am a little lost there. If anyone could provide me with his opinion I would be grateful! Plus some footnotes in order to get me started or any resources explaining in depth Fibonacci and retracement levels would be more than helpfull. Thanks in advance!

I think it's some kind of crowd psychology, like Trading in whole if you want. Traders are always looking for systems and indicators which give them confidence in their trading. So, if you use fibos you're acting just like many others which make the system work somehow if you use them right because the orders are placed by others too. I don't know if using 68%, 32% retracements is really a winnig strategy but the 50% are pretty important because they often indicate a reversal of the trend. In the end not because of mathematics but because many Traders think they're important and are trading them and that's what make the markets move. Trading is all about identifying the points where the most orders are lying and to think about how other Traders act. The retracements help to find these points because they're used by others.

 

[barjon]

To some extent it reflects a standard supply and demand graph. In a rising market it gets tilted up and the bottom line position - everyone wants to buy, but no-one wants to sell - arrives at a higher price level.

https://encrypted-tbn2.gstatic.com/images?q=tbn:ANd9GcR8HILwhG1wUb3D08HiZLBaG7sp4xvOgF8VFF1MqEiKqpMc7uMbrQ

 

[Joules MM1]

it's official, Barjon wins

:cheesy:

 

[neil]

After observation history, Fibonacci theory assumes that at 68%, 32% or 50% retracement most humans (in our case traders) psychophysically are willing to cut losses or fix profit. Furthermore, at these levels a trend is predisposed to changes. If no changes occurs, the theory states that most humans will be ready to wait for next critical level.

Utter Bollox -Bah-Bumhug:whistling