grantx said:
Andy,
I read the first post, and the last few (I don’t think I missed anything in between). On a basic level, my objection to the validity of Fibonacci is that while it reflects many mathematical aspects of the natural world, when applied to a non-natural, man-made, abstract (ie intangible) construct like the markets, unless it was based originally on those principles then I can’t see how those principles will be manifested unless by accident. (Do I get a prize for the longest sentence on T2W?)
If they are present then one can assume they are so by virtue of the major players using them as a basis for trading – possible, but stretching credibility.
Interesting point re your “common denominator” and reaching the sub-harmonic. I don’t think it unreasonable to assume a common denominator exists at a low level (for just about everything) but the question is whether it has any value or application if found. For example (struggling to find something appropriate), measuring the distance between two points using a metre ruler – it will be as accurate as the method used. Greater accuracy will be achieved by using finer measurements – centimetre, millimetre, etc. If a measure was originally found to be 1 metre in length but subsequently found to be 1.001 metre, the difference is insignificant. Couldn’t this be the case with your example in relation to the market?
“geometry is a mathematical representation of the human psyche”. How so? I’m not familiar with this. Is it based on the pythagorean notion of reality?
Regardless of any disagreement – possibly due to my low level understanding of maths - an interesting discussion.
Grant.
Grant
Good questions deserve good answers.
let me see if i can explain.
Fibonacci as many recognize it, is applied because as you rightly say its appears to be all around us, it appears to be a natural order of things
and the assumption that if its all around us then rightly it should be present in 'so could random events.' (if that is what one believes)
this was what these so called phD's were trying to do, to prove if fib worked and the answer is yes and no, to why it works is dependent on the type of market and most importantly how its applied.
now why the majority use it i can only hazard to guess that they read it somewhere and accept it or they themselves see it works in their chosen markets and sometimes it works perfectly and other time it does not but it serves to be used as a reference point.
i believe the latter is probably more realistic of those traders that do well, but nonetheless how the fib ratio is derived is how one perceives it.
lets take a simple situation a market makes a wave 1 which i will refer to as W1.
W1 goes up then it retraces and makes a W2, many will expand W1 by 1.618 to give a target price, thats a reference point, say for argument sakes it hit 1.618 and retraces to make W4 then many or some, i have know idea will then look at how long W2 took to form, apply a fib time and clone it to W4 to see if there is a relationship to 0.618 or a derivative and if there is i suspect they will consider it a squaring of price and time and Bob is your uncle!!.
that particular exercise is one perspective, one needs to know if this move is a dominant move or not, is this potential 5 waves part of a much larger W1 or W3, is it corrective or directional. The 5 waves up could have perfect phi relationships but as i mentioned if its part of a much larger structure then that structure could be using the square rations such as 1.414, 2.414 0.707 etc so then which one is right?
and that structure could be part of an even larger structure which relates to the cube 1.732, 3.464, 0.577 etc and so on, which to a degree answers your measuring question the answer is opposite to the accuracy issue the longer time frame has precedence over the shorter time frame because in real worlds situation what happens in 1 min can be viewed as noise but what happens in 1 year is measurable and comparable to the masses and geometry wants to take into consideration everyone playing not just the few.
now going back the ratios, there are market that expand by the square relationship but retrace to the fib relationship
equally not all markets work on the classical sense of 5 waves so thats another spanner in the works again different markets have different structures hence different geometric relationships.
But what they all do is rotate from one relationship to another sometimes it is crystal clear other times it is not, that to me is the essence of geometry. how is that for the longest answer?
in fairness do the major players use geometry?
they could do, though i suspect their participation is unintentional in their eyes but one that creates the end result
this leads me to your question of the human psyche.
markets involvement will create emotions does not matter whether its program trading or huge institutions, the initial action is always human involvement and the end result is too. therefore money is made by hook or by crook taken from the weak by the strong and this is measurable.
or certainly they way i see it.
and as for disagreements i see nothing but good old fashion discussion
regards
