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Walt, Tom, (Realtraders),
This is an interesting discussion.. I've looked at some old charts, and it
is apparent that Fib rules applied in the 1920's and 1930's.
I'd have to agree that every market turn could be a .618 retracement
from "somewhere", so .618 is as good as any random number for that
purpose...
However, could you profitably trade using any random number in this
way? The answer is no.
As Tom said:-
>In the past, I have run tests on statistical relationships of FIb
>ratios in the market. I found that no Fib ratio value held a
>major significance. this meant that no Fib value could be
>mathematically defined as having relevance.
I have an open challenge to anyone who can trade profitably
using a random number instead of .618, .382 etc..
No-one has taken me up on that challenge and I don't know of
anyone successfully doing this. I know of many who successfully
trade Fib retracements/expansions.
The reality is that there is an art to it, it not a tool for
trading mechanically (there aren't many tools which meet that
criteria, they would be holy grails).. However, there are firm Fib
rules to be applied, for example some fib projections carry more weight
than others. There are also subjective rules to be applied. There are
also non-Fib rules to be applied (trend determination for example).
So Fib trading methods do not lend themselves to mathematical
(mechanical) testing.
The traders brain is required for trading Fibs, which is fortunate
or we would not have an edge, the markets would be traded by machines.
Our brains are our most valuable edge over computers.
-Neal.
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At 11:53 AM 12/19/97 -0800, Tom Stein wrote:
>I believe what Walt is saying has some validity....in fact, we we're sittin'
>around this morning arguing that lots of turns in the market are .618
>retracements from "somewhere".....I believe it is an "art" and not a science
>to develop where those "somewhere"'s are...ie:this wave or the next larger
>wave or the next larger wave.....
>
>Still one can make some pretty nice change, once one gets a feel for using
>the .618
>retracements...Look at CH8.....2.36-3.04=.68...618*.68=.42...3.04-.42=2.62
>THE LOW TODAY WAS 262.5.......you could buy down here using a 2.59 stop.....
>Oh...where to exit?????????????????????????????
>
>Tom Stein comfut@xxxxxxx
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