Proving that Fibonacci retracements have an edge...

[Shakone]

Two of my favorite references:

Fibonacci Numbers in Nature & the Golden Ratio

The Golden Ratio in Nature

But both are wrong. Lets take the first one. There's a picture of a snail shell in the top left. They don't follow the Golden Spiral in general. If you measure it, it isn't that close. The bones in the finger...well everyone has different size hands and fingers and bones. They aren't all in proportion according to the Golden Ratio. Humans are a lot more diverse than you think. It is nonsense. Is it just the hand? If so why? Why isn't my index finger in golden ratio proportion ot my middle finger?

Some may be close to the golden ratio, some may be way off. It is nearly always approximate in nature if it is there at all. And if you find one persons finger bones in the right proportion that doesn't mean the next persons will be.

And yes you may find it occasionally in nature. But you also find the ratio 1:2 in nature. I have one nose and two eyes! Wow! Must be the 1:2 Shakone ratio in nature. Must check the markets to see if it applies. Because if it applies very rarely and inexactly in selected natural examples, it MUST apply in the markets.

 

[HowardCohodas]

The thread title is about fibs providing an edge in markets. The conversation is steering towards fibs in nature which is irrelevant to their application or non application in financial markets. Just trying to keep it on track because T2W has been down the fibs in nature road before and it's always a crock of sh1t.

GR discussions etc are for scientists or stoner hippies and I don't see any PhD's around here.

Proving not providing! Proving, in my background, requires establishing some premises and constructing a logical sequence to see if the conclusion can be reached by obeying centuries of established rules of logic. A proof is often found by proposing a result and looking for ways to logically reach that result. One continues to backtrack using logic to find what principles need to be true in order to reverse the process to construct the proof.

There is no proof or disproof by application of an idea without knowing the rules. If you draw arbitrary lines and someone else draws Fibonacci lines and you suggest either is just as effective you are speculating not proving. If you demand fidelity to the title, then do more proving then speculating.

 

[Prawnsandwich]

Would the anti fibs posters also say that Support / Resistance is nonsense ? The idea that price could react very precisly at a horizontal line on a chart? But how could that possibly occur, whats the scientific explanation, wheres the proof ......

 

[HowardCohodas]

But both are wrong.

Pretty bold statement in light of the many dissertations that disagree with you.

 

[Dommo]

I have no compelling reason to reject the proposition that market responses can be modeled by the Fibonacci sequence.

Fair enough, but can you offer any compelling or even plausible reason to support it?

I can't think of one, so I'm neutral on whether it has any significance.

As things stand, support for Fib levels amounts (to me) to something like:

Fib levels are significant in markets because seashells are beautiful things.

I'm not being flippant. Just because a theory works for some things doesn't mean it is of general application. You're an engineer - I know you know this!

 

[HowardCohodas]

Sometimes you are an absolute tool, Howard.

I would return the compliment, but tools are useful.

 

[Shakone]

Pretty bold statement in light of the many dissertations that disagree with you.

That's missing the main point Howard. There are plenty of dissertations against this nonsense. The point is, take any two things and I get a ratio. Take any two things with one bigger than the other, and there's a very good chance you can find things that will be close to 1.6. It is always selected examples, and even those are often completely wrong, or very approximated. It isn't that you will never find it, it is that I can find almost ANY ratio I want in nature.

 

[Shakone]

Would the anti fibs posters also say that Support / Resistance is nonsense ?

I'm not exactly anti fib, I do think that people enter on them, and that in itself has some value. But if they work, I don't think it is for the reason that the ratio is doing it, I tend to believe it is that you are jumping on a trend on a pullback, which is standard technique. And if you use other things with that to know when or which ones to jump on, then you can make money. I am anti this Fibonacci in nature nonsense though...

 

[HowardCohodas]

Fair enough, but can you offer any compelling or even plausible reason to support it?

I can't think of one, so I'm neutral on whether it has any significance.

I think I have. You don't agree.

Can you cite in this thread or from any other resource a compelling or even plausible reason to reject it?

 

[Shakone]

http://laptops.maine.edu/GoldenRatio.pdf

PErhaps have a read of this Howard. Published by a mathematician from Columbus, Harvard then Maine on the Golden ratio and its place(or not) in structures, the human body etc.

 

[Prawnsandwich]

I'm not exactly anti fib, I do think that people enter on them, and that in itself has some value. But if they work, I don't think it is for the reason that the ratio is doing it, I tend to believe it is that you are jumping on a trend on a pullback, which is standard technique. And if you use other things with that to know when or which ones to jump on, then you can make money. I am anti this Fibonacci in nature nonsense though...

The thread has been diverted a bit with all the GR / nature stuff....that said traders / people do use ratios such as 30% and 50% almost intuitively when looking at trend retracements etc......

Thats not really the point though...the point is whether do they work in trading....or more precisely can a trader use them effectively as part of a methodology....

 

[Dommo]

Would the anti fibs posters also say that Support / Resistance is nonsense ?

Hi - I'm not anti-Fibs. I'm interested in why the idea has any support.

I can accept tht S/R may have significance because, for example, some participants may be drawn to trade at round numbers, or because those in drawdown might consider breakeven an acceptable outcome. I'm sure there are plenty of other qualitative reasons. But I think this is all very difficult to quantify.

But I can't find any plausible qualititative reasons to support the quantitative assertions involved in Fib levels. And I think this is a dead end.

 

[Shakone]

http://www.cass.city.ac.uk/media/stories/resources/Magic_Numbers_in_the_Dow.pdf

Howard, there's one.

 

[Prawnsandwich]

Hi - I'm not anti-Fibs. I'm interested in why the idea has any support.

I can accept tht S/R may have significance because, for example, some participants may be drawn to trade at round numbers, or because those in drawdown might consider breakeven an acceptable outcome. I'm sure there are plenty of other qualitative reasons. But I think this is all very difficult to quantify.

But I can't find any plausible qualititative reasons to support the quantitative assertions involved in Fib levels. And I think this is a dead end.

Hi Dommo... I think the discussion gets diverted when it goes down the road of golden ratios and nature etc

Perhaps the reasons why S/R can work are also applicable to Fibs .......traders drawn to trade at round numbers is not all that different to traders drawn to trade at a 38% or 50% retracement level in a trend...

 

[Dommo]

I think I have. You don't agree.

Can you cite in this thread or from any other resource a compelling or even plausible reason to reject it?

Please restate the compelling reason why Fib levels are significant. I can't find it.

Are you actually serious in your second paragraph?

If you assert A (eg "Fib levels are significant") the onus of proof is on you. It is not for me to prove NOT A.

I'm startled that you wrote that.

I have been asking "Can anyone support proposition A?"

 

[Dommo]

Interesting, but fruitless thread (for me, anyway). Cheers

 

[wackypete2]

Perhaps the reasons why S/R can work are also applicable to Fibs .......traders drawn to trade at round numbers is not all that different to traders drawn to trade at a 38% or 50% retracement level in a trend...

Exactly. IF S/R or Fibs are just lines on a chart then reasons to use either on of them must be valid for the other. You can't say that S/R lines work because.... then say it doesn't apply to fib lines. Round numbers are no more random than any other so why do they offer support and resistance??? Because so many traders use them that way. Nothing magical, only self-fulfilling=proof enough for me. That's better proof than some mathematical theorum or some Einstein type market theory.

Peter

 

[HowardCohodas]

http://laptops.maine.edu/GoldenRatio.pdf

PErhaps have a read of this Howard. Published by a mathematician from Columbus, Harvard then Maine on the Golden ratio and its place(or not) in structures, the human body etc.

Thanks for the reference. Had not seen that before. It was published in the College Mathematics Journal under the auspices of the Mathematica Association of America. I have not yet reviewed their peer review standards for this publication.

 

[HowardCohodas]

http://www.cass.city.ac.uk/media/stories/resources/Magic_Numbers_in_the_Dow.pdf

Howard, there's one.

A very good find. Thanks. I shall enjoy studying it on my vacation next week.

 

[DionysusToast]

The other problem is to be able to use them effectively you've got to do a lot of work, I'd suggest a minimum of 1 year.
.

Honestly, sometimes the nonsense on this site is awe inspiring.

Pray tell how you come up with a year ?

48 weeks x 40 hours a week ?
Did you take a full year of study in Fibs and in the final hour the penny dropped ?
For sure, you must have had a lot of confidence in fibs to study a whole year, with no returns only to get to the end of that year and the lucky pot of gold...
Who supported you during this year of study ?
Of course, this year of study also precludes you from revealing the truths about fibs, for sure, without a year, we'd not understand your inspirational words

What a lot of bo11ocks.