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Let me throw a fly in the ointment of Fibonacci here. I would say that
most folks would not argue with me if we said that a fib retracement of
0.618 is approximately 2/3 and .382 is approximately 1/3. Likewise
0.61803999 is approximately 0.618. So do I place my trade or support
line at the fib number or at the other fractions. Since they are very
close.
The point that I am trying to make is that in mathematics everything is
defined to have a very specific meaning. For example 0, 1, 1, 3, 5, 8,
... is defined to be the fibonacci sequence. 0, 2, 4, 6, 8, ... is NOT
the fibonacci sequence, by definition. The "NOT" that I am using is the
'logical' not that turns a true statement into a false statement and
vice versa.
(I hope you can see where this is going by now.)
So if the retracement was actually 0.61803999999999999... which isn't a
fibonacci number then the retracement isn't fibonacci. Some ratios that
are observed in nature that are fibonacci are exact, not approximations.
Hopefully this takes us back to trading using Fibonacci techniques is
more of a social construct than being one with nature. Let alone by
definition it isn't even Fibonacci, since an approximation of a
Fibonacci number is Not a fibonacci number.
Just something to think about.
Harley
Neal Hughes wrote:
> 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.
> --------------------------------------
>
> 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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