Need help understanding fibonacci

So basically what I am confused about is where to place the levels because I am not sure which swing high and swing low I should be looking for.


So for this chart right here is this right? I chose this swing highs and lows because it shows a significant trend. However the reason I ask is because its not as recent. So do i look for something that is more recent or does the swing high and lows has to be really noticeable? If you look at my chart after i draw the fibonacci levels, it starts going into a down trend but nothing that is significant. If someone can explain this part to me, I would be so grateful. Thank you!

Pair? Time frame?

Fibonacci is a funny one - it really is at best guess work.

You have to understand that fib levels are just ‘integer sequences’ based around a mathematical formula.

F[I]n[/I] = F[I]n-1[/I] + F[I]n-2[/I]

Without going into to much detail, the key understanding is this following statement:

Fibonacci levels are not derived from historical trading levels, rather Fibonacci is layered over price levels to see if their is a correlation. Unlike raw trading indicators which are derived from raw price data and then plotted onto a visual chart for the user, Fibonacci levels are an indicator which is reverse engineered after price.

I forgot the pair. this was from earlier today. Sorry about that but this is the 1 minute time frame. Still demo trading with my strategy been doing it for a week so far and have been getting inconsistent results so I was thinking it might be the way I am choosing the swing highs and lows.

Jezzode is (as ever) more tactful than I am. :8:

I think it’s distinctly worse than just guesswork: I think it’s delusional nonsense. Horoscopes are positively scientific, compared with the way traders try to use Fibonacci levels, in my opinion. I’ve never seen anything other than anecdotal, cherry-picked evidence suggesting that Fibonacci levels are any better or more predictive or meaningful than “random line theory” (which, by the way, can be really impressive-looking, too).

But I’ve seen a [U]lot[/U] of objective, independent, academic evidence showing that they’re not.

One might find this link about the use and abuse of Fibonacci numbers, in general interesting. :slight_smile: (Just my “two pips” :wink: ).

Best to stick with timeframes 15M and higher so you might want to post another chart and zoom out a bit.

I’ll try to address the negative views on fibonacci ratios in [B]forex[/B] - an extremely important distinction - when I have the time (and the energy) since it’s an entirely pointless debate in my opinion. So dont despair or be discouraged.

[I]It is a popular opinion that when correctly applied, the Fibonacci tools can successfully predict market behavior in 70% of cases, especially when a specific price is predicted. Others reckon that computations for multiple retracements are too time-consuming and difficult to use. [B]Perhaps the[/B][/I][I][B] greatest disadvantage of the Fibonacci method is the complexity of the results for reading and the ensuing inability of many traders to really understand them[/B]… [/I]

[I]
…[B]The Fibonacci method should only be used in a combination with other methods[/B], and the results derived should be considered just another point in favor of a decision if they coincide with the results produced by the other methods in the combination…
[/I][I]
[I]…As with any specialty, it takes time and practice to become better at using Fibonacci retracements in forex trading. [B]Don’t allow yourself to become frustrated; the long-term rewards definitely outweigh the costs[/B]. Follow the simple rules of applying Fibonacci retracements and learn from [B]these common mistakes[/B] to help you analyze profitable opportunities in the currency markets. [/I] - [/I]Investopedia
Also, you may gain some insight into how professional traders may employ fibonacci ratios in their decision-making at the following links:
[I]
[B]SeekingAlpha - Forex[/B][/I][B][I]Actionforex - Weekly Review[/I][/B]

I wasted a year of my ‘trading life’ on Fibonacci - it really is an attractive tool when you see it work. However there are as many cases when it doesn’t work compared to when it does work, it’s also highly subjective!

I’m not saying that it can’t be used in a positive application, however [unfortunately] I’m still to meet a trader who uses Fibonacci as a leading driving force which contributes to the success of their account. It’s fair to say that [many] institutional traders also don’t use Fibonacci as a pre-analysis tool, rather it is applied during a trade or after the event as a way to mark out areas of potential interest.

The reason Fibonacci should not used for pre-analysis is logical really (when I say pre-analysis i’m talking of finding a reason to enter a trade)…

Fibonacci is essentially a tool which is identifying areas of support and resistance based on a mathematical formula. It’s a projection tool, plain and simple. Instead of using Fibonacci you could mark out these levels yourself from historical price action. These levels will have substance and are not based on a mathematical formula. So the choice is yours…I know what I would chose and I have the stats to back it up.