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The results of the Fibonacci Poll have been gone over, and calculated,
and gone over again, and recalculated. The results were the same in both
cases.
Among those who responded, 53.8% said they did not use Fibonacci numbers
at all.
46.2% said they did.
Among those who did use Fibonacci numbers, 33% are said to have done so
in a 'casual' manner. These included those who, while looking at a
support level, looked to Fibonacci levels as a confirming indicator, and
one trader who said he would actually move a stop based on Fib
numbers....others,
because they wanted to see what the Fib traders might be thinking. It
would seem, therefore, important to know just how many people out there
are really 'Fibbing.'
The other 66% of Fibonacci users consider it a central factor in their
analysis, systems, and trading, and regard it as the reason their
systems work so well, or that it enhances their trading in significant
ways. (To purists everywhere, forgive the use of the phrase 'systems AND
trading').
Since the poll was taken without regard to, nor in conformity with,
standard accepted poll-taking protocols, the numbers must be taken with
a salt mine.
But of far greater interest was the discussion thread that issued from
it. The most frequent themes we saw were those of 'perceptual filters'
and of 'self-fulfilling prophecies.' There is weight in both views, and
rarely does a trader hold one of these views, without also holding the
other.
With regard to the 'perceptual filters' view, there are many people
speaking on this issue.
Chuck LeBeau wrote, " It is the trader who makes the methodology
successful, not the other way around." Covering this same theme is the
following, with charles faulkner (and anyone named faulkner must be a
genius right?) and jack schwager (stop groaning and just read it or skip
ahead)......:(just because his books are old doesn't mean you are)
hahaha
(a perceptual filter is described as a methodology, an approach, or a
system to understanding market behaviour....)
CF>In our research, we found that the type of perceptual filter doesn't
really make much of a difference. It could be classical chart analysis,
Gann, Elliot Waves, or Market Profile--all these methods appear to work,
provided the person knows the perceptual filter thoroughly and follows
it.
JS>I have an explanation as to why that may be the case.
CF>I'd certainly be interested in hearing it.
JS>I believe a lot of the popular methodologies are really vacuous.
CF>[He laughs] Aha! That's a pretty provocative statement. You've got my
attention.
JS>All these technical methods are based on price. In effect, they're
all different-colored glasses for looking at price. Proponents of RSI
and Stochastics..... would see price patterns filtered through these
price-derived series. Gann analysis enthusiasts would see the price
through a Gann-based interpretation. In these cases and others, traders
accumulate experience on price patterns--albeit from different
perspectives. Some of the methodologies employed, however, are probably
totally worthless. It's simply that instead of looking at prices through
clear glass, traders who use these methods are looking at prices through
different-colored tints. The method, or tint shade, is a matter of
individual preference. To extend the analogy, I would compare these
methods to nonprescription sunglasses: they change the view but don't
necessarily improve the vision. The bottom line is that these methods
seem to work only because the people who use them have developed some
sort of inyuitive experience about price.
CF>That actually fits pretty well with my own view. People need to have
a perceptual filter that matches the way they think. The appropriate
perceptual filter for a trader has more to do with how well it fits a
trader's mental strategy, his mode of thinking and decision making, than
how well it accounts for market activity. When a person gets to know any
perceptual filter deeply, it helps develop his or her intuition. There's
no substitute for experience.
(I really don't know if he discusses WHY 'people need to have a
perceptual filter' in the first place....)
:endif,
Well there you have a capsule summary of the perceptual filters
argument, without going deeper into it.
Then, there is the 'self fulfilling prophecy'. This is an interesting
argument, especially for those who don't understand why some patterns
persist over time, while others are wiped out due to inventive
technicians discovering new market inefficiencies, greedily devouring
them (while they last) (yeah!), and then moving on when too many other
traders have caught on and moved the price out of the window of
observation.
Some patterns do seem, nonetheless, to survive. Are they real, or are
they merely self-fulfilling prophecies?
In their treatment of ascending right triangles (as I recall), Edwards
and Magee explain the dynamics of supply and demand that create this
pattern. In his book,'The Psychology of Technical Analysis,' Tony
Plummer gives a scientific explanation for the Head and Shoulders
pattern, based on the principles described in his book, which are the
principles of Fibonacci numbers. He firmly believes that to be
successful in trading, you must have a system. He gives a sample system,
based on Fib numbers, towards the back of the book. (If anyone has
actually tested this system, I'd like to know what test you ran and what
the results were).
The question will arise...is it real, or is it Memorex? There are those
who work on the raw tested truth, rejecting everything that doesn't put
up the numbers. There are others who get to know their perceptual
filters so well, they can just trade them for consistent gains. Markets
change, and our systems must also change. We make conscious decisions
about what we'll change, and in that is a
subjective....discretionary....decision. Are our systems elaborately
disguised perceptual filters? I'm sure some serious system designers
will reject that idea as pure nonsense. Ideas are based on a logical and
objective process, a continuation and refinement of the implementation
of new data, whether knowledge or market stat. This also is the role of
the mind when recalculating based on new experience.
Well, those are the data from the poll. I hope you enjoyed the excellent
comments from many fine speakers as much as I did. I will attempt to put
the thread into a single, readable document, arranged by date, earliest
to latest. If I do so, I will announce its availability for free on the
List.
Regards,
Monte
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