Quote:
Originally Posted by 4xStar
My big question is, how do you know where to draw these fibs, especially the fans? I always learned from last sw to last sl .. but you are not doing that .. the top on July 21 0600 was not the high, that came later on the 23rd.
I had a fan fib drawn from the low of the 25th to the high of the 25th, which was the last sh/sl, but obviously not the right place to draw it.
I had the regular fib drawn correctly as you mentioned above and in fact price stopped at exactly the intersection of the 50 retracement of the regular fib with the 61.8 of the fan fib. She does seem to respect her fibs so this is a valuable tool.
But .. how do you know exactly where to draw them? Or do you just develop a "feel"?
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Drawing any line study is like placing a stop (which is a line study on its own - or it ought to be): part of it is rational ("above resistance", "below support", "below a round number
n" etc.) while the other part is intuitive. As we know the "intuitive" part is more difficult because it takes time and effort to cultivate.
The same goes here. The first thing to mention is that I "telescope" fib fans. Yes, fib fans are fractal, and that is important and related, but not exactly what I mean. By telescope, I mean the layering of fans from different time scales (not TFs, necessarily) to reach a historic layout of S&R for the pair.
To begin, go to the widest TF you look at: I glance at monthly and weekly, but usually am to deep in the weeds to give those more than a passing glance and a knowing nod. The first I consider is the daily. Draw as you normally would: depending on direction, swing low to high or vice-versa, generally excluding the latest of these.
Within that fib fan, I will pick a secondary swing low/swing high, typically (not always) with the latter point coinciding with the latter point of the larger fan. This smaller fan takes in a more recent fraction of the data series from the context of the wider fan, in effect zooming in more closely to look at price with a higher degree of granularity.
This can vary from time to time, pair to pair. The largest fan is easy: what comes after is situational. If the larger fan was from swing high to low but the market has more recently recovered from that low, but then corrected a bit (in other words, a general V 1-2-3 pattern has completed). The larger fan will give insight on that recovery because it slants down, but where will price go from end of the V? Here you draw from the middle of the V to the top. The result will create a lattice pattern.
So you've constructed two large fans, but you trade swing or intraday: your lattice points are few and far between. Repeat the process, zooming incrementally. I move from 1D to 3H. Here is where most of the fans emerge. The data series is more timely, and produces more immediate price S&R levels; helpful, but not as enduring: price quickly move through or off of these lines, pushing them quickly back into the annals of the pair.
Here is where things become interesting: swing lows and highs on the 3H, unless we're in a tight range, are often invalidated. Lattices are drawn more often with more frequent oscillations in price as price action becomes noisier. The point to catch, though, is that they are
swings lows and swing highs: significant levels of engagement for opposing market forces. That means old fan lines generated by old levels (this explains the fan line I referred to in my previous post) remain relevant off into the future. Like old trendlines (again, we're talking S&R), these old drawings have a tendency to crop up again and again as price abides by them - it pays to be vigilant over what bounds price has respected. You know when they become invalidated: they move out of the scope of the chart, or your lines become too numerous, at which point the zoomed-in fans drawn earliest are first to go.
As you might guess, the larger latticework created is very infrequently rendered invalid because they are overarching, macro levels. Do I ever go to 1H to draw? Not much: only to zoom in further to monitor S&R. I never draw on anything lower than 1H; but for long daytrades/swing trades are normal, so 30M on down has very little relevance.
Along with these, speed lines are very helpful: if your charting package doesn't offer them, no doubt there's an MT4 indicator to produce them. Generally these lines measure 1/2, 1/2 and 2/3 of the swing high to swing low, and fit betwixt the fib fan lines. the construction of speed lines is performed by creating a right angle using the two points in the swing low-high/high-low and then measuring out these critical points. This study is all but unknown, but is a very, very useful adjunct to both fib fan and retracement drawings.
More to say, but I'll let it go at that general description. Let me know what questions you have, if any!
The bears are building strength!
She can surely make new all time highs despite what the illusion is telling you.
Tannin here is the great Crocodile...in the quiet river? :)
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