I use it because I like how it measures a swing, it breaks the move up into easy to see segments giving what could be seen as natural progression with the extensions if price continues to move there.
Like all indicators it probably shouldn’t be the only thing you use and would be better used as one of a set.
My experience with Fibs is that they work, but only occasionally.
It’s not predictable enought to incorporate into a trading strategy, it’s the kind of thing that looks great when you put it on charts in hindsight. But on active charts it’s not particularly reliable.
I guess it’s a matter of understanding and preference… Fibs are a vital tool in my trading and I work magic all the time with them. They are insanely reliable when used in conjuntion with sound Price Action Analysis. Not to mention… lazer accurate in the trained hands of a Fib Trader.
Just My 50 lot’s worth :57:
I must beg to differ here. Yes everything looks good on the left side of your chart that I do agree with. But just like any other tool out there by it self means nothing but mix it with price action and what ever else you wish. When they line up there golden. Also yeah I will tell you that you can use fibs and S/R alone but you must take that into context. Will it work if you go on a 1 minute chart to find S/R but use fibs levels off a weekly chart? I might be able to but no it will not work. Give me anything and i can make it look good or bad on the left side of a chart. Reguardless if you found the holy grail or not. I can disprove (or prove) anything on the left side. It the right side that matters. Also fibs are not for everyone just like any other tool out there. Some will work for you as a trader and some dont. Take MACD for example I cant use that to save my life but will I discredit it? No I will not I know others that understand it and can make it work. So it works for those that know how to use it. But always IMO you got to know price action to see what is price doing at these levels. Price action is key. After that S/R and when tools line up with these then all is well.
I have a quick question about Fibs, which I can’t seem to find anywhere (although I suspect it probably is out there somewhere), How do you work out the swing high/low? Is it just using the lowest/highest closing prices between any dates, or is there more to it?
The most common way to use fibs is to draw them from a swing high to swing low. Or swing low to swing high what ever. However you can use fibs in many different ways like drawing it off the high of the day to the low of the day. I will also draw them off a swing high to a swing high. Just play around with them there are many different ways to use them and all are valid as long as you know what you are looking for
So it is more about finding your own way to use and interpret them rather than a set system, cheers for clarifying for me
Slow down young padiwan I did not say that. Using fibs off the swing high/low is going to be your most effective way to use fibs as so many other traders use them that way. The more creative you get with fibs the less traders see what you are looking at and thus losing its effectiveness. Also remember fib extensions they are just as important as the regular fib numbers
To be sure, the market does indeed do what it wishes. Fibs are factors that many watch, including the quant black box institutional traders. They DO influence equities, no doubt about it…they have massive amounts of cash and margin availability and DO move many markets. All markets can be evaluated BASICALLY by utilizing the same tools. Forex, however, due to its size, does differ in some respects. Central Banks do utilize quant trading and have spent countless hundreds of millions of cash attempting to perfect their strategies. The good news is that there are so many institutional traders involved that it has become a relative factor and can actually cause volatility in some markets that some insist can be a positive factor.
Do understand though, that the best minds in the business know all the strategies in the book and have created additional ones that are not published currently in any magazine or website. They are busy too, attempting to discern what the other heavy hitters and institutions are doing in an attempt to counter their moves. Its an ongoing game with, albeit, high stakes and their easy targets are the retail trader. I once asked a seasoned trader/instructor what chance did the small trader have in this abyss of professional traders? His answer: “We’re like a small mosquito on a nude beach…we’re looking to take just a little bit of blood”! Great analogy I thought.