New Fibonacci Trader
The Fibonacci Trader - Robert Fischer
Synopsis:
Interesting book regarding Fibonacci ratios as a means of trading the markets.
Fib-numbers are leading indicators, not lagging, and thus are essentially predictive ?!
The book has the following chapters;
1: Basic Fib Principles
Covers the 0,1,1,2,35,8,13,21 series etc.
The Fib-ratio of 1.618 ( also known as PHI )
Describes the other summation series, starting from 0.618 and 1.
i.e; 0.618, 1, 1.618, 2.618, 4.236, 6.854, 11.090 etc
This book seems to use Fibs to confirm Elliott Wave Theory, in that it looks to see where the market is in terms of the 5-wave trend and 3-wave counter-trend idea.
2: Applying the Fib Summation Series
A chapter of examples where they use the Summation Series to determine where in the future the market is likely to change trend.
For example;
From a major high ( or low ), use the summation series, from day 8 onwards.
( eg; if previous high was on Sept 10th, then possible trend-reversal days are;
Sept 18th ( Sept 10 + 8 )
Sept 23rd ( Sept 10 + 13 ) etc )
Apply this principle for the past few major highs and lows, and there will days that appear more often than others.
These days are strong candidates for trend-reversals.
3: Applying the Fib Ratio to Corrections and Extensions
Examples of Fib-ratios applied to corrections and extensions.
The ratios that are most significant are; 38.2%, 50%, 61.8%.
This book describes ENTRY-rules, EXIT-rules, STOP-LOSS-rules.
Also, RE-ENTRY-rules !! This is interesting as it takes account the fact that strategies are not perfect. It considers when it is reasonable to re-enter a trade, having been stopped out.
4: PHI-Channels
Interesting idea on channels.
Slightly different from trend-channels, and worth further analysis.
But, in principle, once the baseline is drawn, and the parallel-line which forms the core channel, the PHI-channels are just 0.618, 1.618 etc the size of the core channel.
They are used to determine support and resistance for future trend-reversal points.
5: PHI-Ellipses
This chapter describes ellipses which are difficult to describe here without illustration.
But, basically, they are an attempt to encapsulate a trend within an ellipse.
However, I find these are pretty, but difficult to use as an indicator, as you need the high and low to draw them correctly !
I cannot see how these can be used to conduct analysis.
6: PHI-Spirals
This idea starts with the nautilus shell, and then attempts to apply them to the markets.
This is difficult, and again, looks pretty.
However, I suspect that the price-time scaling has to be correct, otherwise the spirals will not work.
7: Fib Time-Goal Analysis
One of the best chapters.
It is a variation on the use of summation series to determine future trend-reversal points.
Basically, you take two previous highs, and apply the 3 key Fib-ratios to find trend-reversal days.
For example;
Distance between two previous highs is 20 days.
Potential reversal days are:
12-13 days from last high ( 12.36 = 20 * 0.618 )
20 days from last high ( 20 * 1.00 )
32-33 days from last high ( 32.36 = 20 * 1.618 )
Apply this principle to a number of previous highs and lows, and dates that cluster are strong candidates for trend-reversal days.
8: Combining Fib Tools
Says what it says on the tin.
WINPHI CD-ROM
The CD-ROM that comes with the book illustrates many more examples that the book describes.
As it is interactive, you can practise applying spirals, ellipses etc.
Summary;
Quite an interesting book, especially the Time-Goal Analysis Days.
I enjoyed the fact that there are ideas that can be applied, and tested.
The book applies these ideas to the SP500 and DAX from 2000 and 2001.
However, the more complex ideas, the spirals and ellipses, can only be illustrated through the CD-ROM.
