Can someone explain the logic behind Fibonacci tools?

Forgive me for questioning what most people seem to swallow so easily, but what exactly is the logic behind applying Fibonacci ratios to financial markets? Is there any realistic explanation behind the perception that price action should respond to these levels? Is it a mere self-fulfilling prophesy, or could it be Leonardo himself directing price action?

Regards, and thanks in advance for any sensible explanation.

[QUOTE=“JRC;639735”]Forgive me for questioning what most people seem to swallow so easily, but what exactly is the logic behind applying Fibonacci ratios to financial markets? Is there any realistic explanation behind the perception that price action should respond to these levels? Is it a mere self-fulfilling prophesy, or could it be Leonardo himself directing price action? Regards, and thanks in advance for any sensible explanation.[/QUOTE]

Well there’s the million dollar question! I don’t know whether I fully buy into the whole mystical side of it, but as you imply in your question - if enough people believe something works, it starts to work. I use Fib in my trading as it works, often to the pip on the higher timeframes. Why does it work? That is a debate without end.

There is no logic or something scientific explanation behind this. I believe that all these levels described by fibonacci tools have been shaped by using them during decades

Well let me try to explain this for you. It’s real first of all in the sense that math is truth and the sequence Fibonacci discovered was also used in the building of the pyramids as well as all computer software engineering. As for its specific use in the markets it is applicable because the market is running off of mass human behavior patterns which repeat but not always exactly the same. For example you know a bird when you see one or a fish but you don’t always need to know what specific one it is to be able to recognize that its an opportunity for you if need be to eat or a pet whatever you get it. The problem with Fib levels is when people don’t draw them correctly or if they forget that trading is a Art not an exact science since human behavior is mostly all about perception and not scientific facts. Hope that helps.

They are just a tool. Like everything else people get frustrated when they don’t know how it works properly.

I’m fairly confident that I know [I]how[/I] Fibs should be used, but the logic behind their use just seems like little more than ‘magic’.