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## Fibonacci Retracement Lesson - Contradiction in drawings?

There seems to be an apparent contradiction between the first and second drawings of Fib Retracements lesson, or is this my not grasping the logic? (sorry cannot post a link yet as haven't earned my pips).

The first is an uptrend, so draw at swing low to swing high. So far so good. Draw from the bottom of the bullish candle to the top of the bearish candle... Ok... That all makes sense. The second of each pair is the actual swing in price...

Second drawing for downtrend... The retracement is drawn from BEFORE the swing actually occurs in the first of the 'swing pair'? Line from Bullish candle to bearish again. Why is this? I would have drawn from 1.4180 to a little above 1.3854 (candle before the bearish) or even the bullish candle after?

Please explain this to me as it has a bearing on support and resistance. Thanks d

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Is this the one in question?

If it is, you might need to rethink your understanding of fibs.

You would use the highest point in a swing high or low.
All other factors of confluence notwithstanding.

From your post, it sounds to me like you are trying to get a fib line, and an S/R point to line up. Sometimes they do, sometimes they don't.

S/R is not really a hard line usually. It's a zone. Both sides will probe around, and there can be breaches, but usually it's a daily, or weekly close above or below the S/R point that confirms it.
Last edited by Master Tang; 12-02-2011 at 12:10 PM.

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Was this chart from babypips school? If so I think someone needs to tell them 50% is not actually a fib level. Not a good way to teach fibs lol.

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Originally Posted by Master Tang
Is this the one in question?

If it is, you might need to rethink your understanding of fibs.

You would use the highest point in a swing high or low.
All other factors of confluence notwithstanding.

From your post, it sounds to me like you are trying to get a fib line, and an S/R point to line up. Sometimes they do, sometimes they don't.

S/R is not really a hard line usually. It's a zone. Both sides will probe around, and there can be breaches, but usually it's a daily, or weekly close above or below the S/R point that confirms it.
Oh! OK So that's how it works! Thank you for clearing that up.
I wasn't consciously trying to get fib and S/R to 'line up'. my understanding was that fibs could act as S/R, in conjunction with other indicators such as SMA, stochastics all backing up the 'evidence' as it were. I understand that they are more zeroing in zones. But they do help to set stops and limits, right - "all other factors of confluence notwithstanding" (by which I think you mean what I have said here, but please correct me if I am wrong!)

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Originally Posted by bobmaninc
Was this chart from babypips school? If so I think someone needs to tell them 50% is not actually a fib level. Not a good way to teach fibs lol.
Lol I wouldn't dare presume to ruffle too many feathers yet! hahaha People like their comfort zones!

6. Originally Posted by DummyRun
Lol I wouldn't dare presume to ruffle too many feathers yet! hahaha People like their comfort zones!
It's true, 50 is not a number in the Fibonacci sequence but weather or not it works in trading is a different issue. BP should mention that in the school so people don't misunderstand..I don't know if they did or not.

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I do not deny 50% is surely not to be taken for granted as it is a powerful level and why it is on all fib tools. But I just thought I would point that out since the topic was about contradictions in drawing fibs. as thats the only contradiction I see in that chart.

8. Another thing that I think is misexplained in BP school is this:

These ratios are called the "golden mean".

Actually the golden mean, golden ratio or divine proportion is phi or 1.61803.... or 61.8% retracement, so this is the key level to watch.

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Originally Posted by yunny1
Another thing that I think is misexplained in BP school is this:

These ratios are called the "golden mean".[/URL]

Actually the golden mean, golden ratio or divine proportion is phi or 1.61803.... or 61.8% retracement, so this is the key level to watch.
Just to clear it up a little further. Actually its not phi or 1.618 or 61.8%. It is phi is equal to 1.618 and the inverse of 1.618 is .618. 1/1.618 = .618. The math is below. This may be confusing for some but explains the numbers.

1.618/x = 1.618 = 1.0
1.0/x = 1.618 = .618
.618/x = 1.618 = .382
.382/x = 1.618 = .236

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Originally Posted by Rjmiller421
Just to clear it up a little further. Actually its not phi or 1.618 or 61.8%. It is phi is equal to 1.618 and the inverse of 1.618 is .618. 1/1.618 = .618. The math is below. This may be confusing for some but explains the numbers.

1.618/x = 1.618 = 1.0
1.0/x = 1.618 = .618
.618/x = 1.618 = .382
.382/x = 1.618 = .236
Hey this is the 'Newbie Island' thread here remember! OK there may some mathematical genius newbies I guess, but I couldn't help blaspheming in incredulity at the geekishness of this response! ; D Obviously genius but are you a little mad too?! lol

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