Is there any real value in predictive statistics that traders seem to pull out of thin air? The question, then, is a simple one; Someone has to be right and someone has to be wrong, why do the market adherents in each camp disagree on something so fundamental?

Some of the best and brightest academics claim there is no predictive ability in using Fibonacci trading.

Taking The Magic Out Of Fibonacci Numbers

The science of predictive indicators does not pass the litmus test of scientific legitimacy. Yet many traders swear by them and are very successful in trading them profitably. Welcome to the world of day trading. Because the functions of the market are not well understood, as evidenced by the universe of varying opinions on market price action, you will find a plethora of divergent theories and traders who vociferously defend the system they trade to the exclusion of other trading systems.

Further, you are unlikely to find two traders who trade identically, even if their investment philosophy is identical. The ratio used to calculate this set of numbers is 1. Originally identified by mathematician Leonardo Fibonacci in the thirteenth century, their popularity has increased exponentially in day trading.

The question is whether they work, and why do they work. Anyone who has traded Fibonacci numbers comes to realize that the market often pauses, sometimes turns, and often blasts right through the sequence of Fibonacci retracements. There is no denying the numbers are relevant, and traders pay attention to them. But why does the market stop and start so often on these numbers? You cannot necessarily predict which Fibonacci number the market will choose to honor.

On the other hand, many people identify market high and possible lows using Fibonacci ratios, but any trader could identify these point using the alternate method of support and resistance. It is my opinion that Fibonacci numbers work just fine, but the reason they work is because so many technical traders use the system. When the market makes a move from trough to peak, most technical traders will immediately add the Fibonacci retracements to the entire move, and hence the system becomes a self fulfilling prophecy.

Many true Fibonacci traders take offense to this explanation, and claim there is relevance in the ratio. As a chaos theory adherent, I feel the only scientifically relevant clubpenguin moneymaker free download is the self-fulfilling prophecy argument. The Fib people point to ancient architecture and a wide variety of natural phenomena that use the Fibonacci sequence.

As a day trader, my job requires me to take profitable trades. Whether the Fibonacci sequence is scientifically verifiable is irrelevant to me, as I am only concerned with profitable trades.

I cannot recommend using only Fibonacci ratios in your trading. However, I always trace in the retracements after a significant market move, up or down. You would be surprised how often the market honors them, too.

I especially like to trade the Fibonacci when it has already stopped and turned on a specific number, as this establishes real legitimacy for this forexsignals.com review on the chart. Then I can go to work trading, based on the info the Fibonacci has imparted.

So there you have it, the reason the Fibonacci ratios work is unclear, and I am unwilling to bestow mythic credibility based on the history of the ratio. On the other hand, there is no denying the market pays attention to these numbers. Whether I believe they are a self-fulfilling prophecy is irrelevant, because as traders we only deal in profitable trades and growing account balances.

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How to Use Fibonacci Retracements in Day Trading

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How to Use Fibonacci Retracements in Day Trading

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