[tonymand]

I am sat here on Sunday afternoon trying everything I can to avoid doing my overdue tax return when I came across the 'fibs are lies' post on this thread. Well that fella certainly has problems and probably wont make it in this business. You have to be curious and have an open mind and above all observe what actually happens with price action if you want to be successful. That is a talent possessed by few. Daedalus has done a fabulous job of not only bringing fibs to the fore but also showing you how to develop and implement a trading plan and tweak it as necessary as you go along

Now are fibs the golden ratio? I dont have the foggiest idea. Can they help you in trading - quite likely. Why - I havent the foggiest idea but if running naked round the neighbourhood gave me a reliable edge in fx I would do it (late at night probably!)

I thought I would demonstrate how you might take an observation and begin to build a trading idea out of it. If you are starting with fibs obviously pay attention to Daedalus, but there are many ways to skin the proverbial cat.

Jimmy Young talks about the power of the 78.6 fib so I thought I would demonstrate this on a random chart and timeframe.

I have taken the H1 GU and since November you would agree we have a nice downtrend. Lets say you simply sold on retracement to the 78.6 fib stop above 100%. As you can see most trades go in your direction

Now introduce Daedalus' idea of taking profit at a certain level. For simplicity sake I have used all out at the 38.2 rather than a staged exit. As Daedalus rightly says we have lost 2 enormous runs (but could we have stayed with the trend live) but have replaced this with a certain return of over 80% (see final chart for calculation of this). This includes taking trades where we might well have seen that we were in a retracement and indeed a couple worked out OK even against the retrace

Note this is not a trading system. You need to do the sort of development work that Daedalus has done. This includes multiple timeframes (for me key support and resistance levels), sensible money management, tests on different pairs and timeframes etc etc (in fact all the things D talks about).

Next time someone says this is all lies, take a step back and realise that we are trying to make sense of a chaotic environment. We need to be pragmatic and simply ask what works. Since Nov Fibs on this chart would have assisted you to be on the right side of a trade. Will it carry on being useful over the next few months, who knows. Thats part of the continuing questioning and testing to find something thats robust enough to be helpful for long enough. Having followed the 78.6 on the GU for over a year though I can tell you it is not a flash in the pan or restricted to this timeframe. I dont however trade with it like this but will take note of it in my overall analysis

Hope this is food for thought