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Neal Hughes wrote:
> Harvey,
>
> I'm not sure I understand the logic that the Fibonacci behavior
> is more social construct than a natural effect just because
> of the lack of decimal precision. Since most instruments trade down to
>
> a precision 3 decimal places, it would be impossible to use true
> Fibonacci precision.
I think at the end of this post reveals that you are about a 1/2 step
from realizing that it is a social construct. I think some of the
problem might be communication through email and differing math
backrounds.
>From below you do understand that it is almost the use of Fibonacci
ratios. Since mathematics is an exact science. (A cold and cruel
discipline. I'll beat Andrew Willes - solver of 'Fermet's Last Theroem',
is probable more hard nosed than any trader you'll ever run into.) The
rules are vary exact. Either it is a right triangle or it isn't. If it
isn't a right triangle then it is another kind of triangle. Just not a
right triangle. The same hold true for the Fibonaci ratios. Either they
are Fibonacci ratios exactly else they are not Fibonacci ratios.
You even say below it is almost Fibonacci. Hence an infinite number of
sequences could exist that could result in the same approximation of
0.618. You could pick any one of them and you could call it the Neal
Ratio and the market could equally and successfull use this ratio
instead of the Fibonacci Ratios.
So the first step is to realize that what you actually trade with has
nothing to do with Fibonacci numbers. (You have done this.) My
assumption here is that you do use the exact or close to exact Fibonacci
numbers for planning your strategy in the market.
[So here is a little bit of abstract logic to get yo to the next step. I
hope you understand it.]
YOU MAKE a PLAN using FIBONACCI RATIOS.
YOU MAKE. (might need to think about it for a second.)
YOU are part of society.
YOU MAKE a PLAN/strategy to deal with SOCIETY (other traders).
Where did you get this PLAN from? Another person in SOCIETY.
ANOTHER person CONSTRUCTED a PLAN and gave it to YOU.
ANOTHER person CONSTRUCTED a PLAN and gave it to THEM (other traders).
How MANY people CONSTRUCT a PLAN like YOU? MANY.
MANY people constitutes a SOCIETY.
SOCIETY CONSTRUCTS a PLAN.
The PLAN is a SOCIAL CONSTRUCT.
THE PLAN is FIBONACCI RATIOS.
FIBBONACCI RATIOS is a SOCIAL CONSTRUCT.
Now do you get it?
This isn't perfect but I hope it takes you from the I to the he, to the
we, and to the I am part of the we.
>
>
> Many of the cases of Fibonacci phenomenon in nature would not
> be exactly precise either. Mathematically which is the
> correct Fibonacci ratio? Take a look at the relationship between
> the first 10 Fib numbers you will see that the ratios are not
> mathematically identical. As the neighboring Fib numbers become
> larger the ratios become more similar, but it is not necessary
> to limit our thinking to absolutes. I do stick to .618, 1.618,
> .382, 1.382 etc. rather than 3/8 and 5/8 though just out of habit..
This is what AL had explained. The ratio comes from the limit as the
ratios approach infinite.
>
>
> It is important too that beginners realize that one of the basics
> rules of Fibonacci trading is that you do not expect to place
> your buy and sell orders at exact Fibonacci nodes. Fibonacci
> trading tactics leave room for subjective decisions, precision
> is not vital.
>
> Perhaps readers should imagine the word "almost" before the word
> Fibonacci when dealing with trading methods. As in "Neal uses
> Almost Fibonacci tactics"...
Thanks for sharing an important insight into what really takes place.
Harley
>
>
> -Neal.
>
>
> At 04:45 PM 12/19/97 -0600, Harley Meyer wrote:
> >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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