Hi im just wondering which one is better.Ive seen many videos where people use fib retracements for cathing retracements which is fine.But the fib extension is just a very bizarre prediction that the trend will continue, which we do not know.70% of the time there is not strong trend on the market,but even if it is we dont know how strong will it be,so a retracement/or even a reversal is more likely to happen than the trend to continue.The question is why are they good, because i dont see the point,why should anyone use them.
The formula for fib extension is:
[ul]
[li]swing high + (swing high - swing low) * fib ratio in uptrend
[/li][li]swing low - (swing high - swing low) * fib ratio in downtrend
[/li][/ul]
Now the expansion is used to catch the potential movement of the trend after the retracement, so here is an example:
The pink fibo is the extension tool and the blue one is the retracement.You can clearly see the retracement tool being drawn from SH to SL and showing us the retracement level in this case a small retracement from a downtrend, and after it the resuming of downtrend.While the pink extension tool is showing us, the possible price’s location after the retracement is over and the continuation of the downtrend is continuing.
My question is what is the point of the fibo extension tool? Is is worth anything, i mean retracements are 100% that will happen in a given trend,so you guys who are anti-trend traders might just want to watch the trend do retrace and get your fib retracement tool ready for action.But to use the extension tool for me is complete nonsense,because you dont know that that retracement will be a retracement or a reversal? Sure a retracement trader will trade it and step out at the 61.8 fibo and leave with the pips.But if it was a reversal than he could have won 2x more,but anyway glad that he won anything.But the guy who is a “trend is your friend” guy will get his extension tool and put in a trade when he sees a weakening in the retracement, but turns out to be fake and lose some money.
So in short, the retracement tool is like thinking 1 step ahead while the extension tool is thinking 2 steps ahead.So in my logic the retracement tool is way more accurate than the extension tool.What do you think?
I spent the last month learning the retracement and expansion tools. I don’t think it was a waste of time and as a matter of fact I’m glad I did take the time to check them out. IMO neither of them are any good especially by themselves. They both try to apply mathematical formulas to an outcome that’s can’t be predicted mathematically. I think observing pivot lines give you much better info and a lot more accurate, especially when used with other indicators. Like I said IMO I wouldn’t use either. It will be interesting to see what other traders who do use them say.
I agree with you. I have studied both fibs and pivots a great deal. I can show how pivots, when used under certain circumstances, can give a very small, demonstrable, statistical edge to a trader. I have never found such a statistical edge with fibs. If any trader can show a repeatable, non-random use of fibs that can be backed by stats then please enlighten both gp0053 and me.
No need to say how they work in theory, etc. I’ve got that. What I haven’t got is any concrete evidence that they perform better (or worse) than random lines placed on a chart. Petefader once came close but fell just short of convincing me.
Proximus, I am not trying to derail your thread. Perhaps someone can demonstrate to you that extensions are just as significant (statistically) as retracement levels (and provide the statistical edge in their use) – in which case we will both be enlightened.
I found that fib retracement is really helpful.But it is not a signal provider,rather an exit point provider.Extensions seem to me like a bunch of BS.Similar formula but totally takes away the charm of the fibonacci numbers.I know for sure that retracement is valid and working and i know for sure that its better in all circumstances than extensions.Of course thats only my opinion thats this thread about to debate this stuff.The reason why retracements are so good and extensions are so bad because you cant know that a retracement will retrace or will reverse, and because you have to think 2 steps ahead which will lower your winrate.So i`m on the retracement side.
PP are also nice but that is rather an entry point provider if you are counter trend like me.Especially the fibo PP is very nice.I dont like the camarilla and the classical one.
Yes ofcouse you must combine it with other stuff, but the basic point is that we have to find it how well they work “naked” and after that we can use it with other stuff.If a retracement is better/more accurate by itself than an extension then its logical that if you use it will harmonic patterns/other indicators/eliott wave whatever, it will still be bettar than extensions.
