Fibonacci on your charts Charting Fibonacci Levels can be useful for traders to identify reversals on any trading chart. On this page we will look at the Fibonacci sequence and show some examples of how you can identify this pattern. Fibonacci numbers were developed by Leonardo Fibonacci and it is simply a series of numbers that when you add the previous numbers you come up with the next number in the sequence. Here is an example: 1, 2, 3, 5, 8, 13, 21, 34, 55 Each value in that sequence is the sum of the two prior values and it continues infinitely. One of the characteristics of this  sequence is that each value is approximately 1.618 times greater than the prior.

Higher time-frame Fibonacci levels are definitely stronger support/resistance than lower time-frames.

As for implementing them into a trade plan, TRSI is very helpful for that. If your charting system doesn’t plot the TRSI, then MACD/Stoch is a reasonable compromise. This is explained in the “Trend” trading seminar here; Charting Fibonacci Levels with Trend Also, once in a while I do an advanced TRSI live webinar here; Charting Fibonacci Levels with TRSI

Those are many hours of high-level trader training, not really feasible to explain in a forum, or a few pages of text.

For charting Fibonacci levels on 5-minute charts, I would look at all levels 5m through monthly, even yearly. Though most of the time you will be charting Fibonacci levels on 5m-4H FibLevels.

Charting extra Fibonacci Levels in MetaStock

>Subject: how to draw extra fibonacci levels in metastock
>
>when charting fibonacci levels (retracement) in metastock (i
>have version 7.0 pro) i can get only the 23%, 38%, 50& and 61.8% levels.
>i wish to add the 14%, 78%, 123% and 150% fibonacci levels to this
>study. how can i program metastock for charting these fibonacci levels automatically?
When charting Fibonacci levels in MS v8, simply drag ‘n drop the Fib retracement from the line
studies toolbar onto a chart, then right mouse click on any of the
Fib lines on ur chart, and choose properties, under the retracement
line tab, simply add the values you want, in ur case +14 +78 +123 and
+150 values respectively using the input box and the add button. When
u click apply, charting Fibonacci levels (the addition fib values should appear) is done.

I am uncertain whether MS can save these new values as defaults for
charting Fibonacci levels, but if you save each chart as a smartchart – it remembers the extra Fibonacci values on that particular chart.

HTH

> Also if i want to draw horizontal lines based on some user input
> data and subsequent calculations and manipulation of this data how
> should i go about it?

Assuming you’re talking indicators – try something like the ffg in
Metastock formula language (using MS v8 in my case)

Upperlimit:=Input(“Upper limit periods”,50,100,75);
Lowerlimit:=Input(“Lower limit periods”,1,49,15);
Upperlimit*2;
Lowerlimit/2;

>In simple terms all this does is ask for user input of an upper an
>lower limit, with the numbers in parentheses in respective order
>referring to a lowest allowed input, highest allowed input and
>default user input values. Then you can manipulate the input data as
>you like using whatever maths/other functions available to you in
>MS. e.g I simply multiplied the Upper limit by 2 and divided the
>Lower limit by 2 above. Do whatever maths you need to along similar
>lines. Hopefully you can work things out from here. Have fun …
>
>Cheers

Results-A Quick Poll

The results of charting Fibonacci levels Poll
have been gone over, and calculated,
and gone over again, and recalculated. The results were the same in both cases.

Among those who responded, 53.8% said they are not charting Fibonacci levels at all.

46.2% said they did.

Among those who are charting Fibonacci levels, 33% are said to have done so in a ‘casual’ manner. These included those who, while looking at a
support level, were charting Fibonacci levels as a confirming indicator, and one trader who said he would actually move a stop based on Fib
numbers….others, because they wanted to see what the Fib traders might be thinking. It
would seem, therefore, important to know just how many people out there
are really charting Fibonacci levels.

The other 66% of Fibonacci users consider it a central factor in their
analysis, systems, and trading, and regard it as the reason their
systems work so well, or that it enhances their trading in significant
ways. (To purists everywhere, forgive the use of the phrase ’systems AND
trading’).

Since the poll was taken without regard to, nor in conformity with,
standard accepted poll-taking protocols, the numbers must be taken with
a salt mine.

But of far greater interest was the discussion thread that issued from
it. The most frequent themes we saw were those of ‘perceptual filters’
and of ’self-fulfilling prophecies.’ There is weight in both views, and
rarely does a trader hold one of these views, without also holding the
other.

With regard to the ‘perceptual filters’ view, there are many people
speaking on this issue.
Chuck LeBeau wrote, ” It is the trader who makes charting Fibonacci levels successful, not the other way around.” Covering this same theme is the
following, with charles faulkner (and anyone named faulkner must be a
genius right?) and jack schwager (stop groaning and just read it or skip
ahead)……:(just because his books are old doesn’t mean you are)
hahaha

(a perceptual filter is described as a methodology, an approach, or a
system to understanding market behaviour….)

CF>In our research, we found that the type of perceptual filter doesn’t
really make much of a difference. It could be classical chart analysis,
Gann, Elliot Waves, or Market Profile–all these methods appear to work,
provided the person knows the perceptual filter thoroughly and follows
it.

JS>I have an explanation as to why that may be the case.

CF>I’d certainly be interested in hearing it.

JS>I believe a lot of the popular methodologies are really vacuous.

CF>[He laughs] Aha! That’s a pretty provocative statement. You’ve got my
attention.

JS>All these technical methods are charting Fibonacci levels based on price. In effect, they’re
all different-colored glasses for looking at price. Proponents of RSI
and Stochastics….. would see price patterns filtered through these
price-derived series. Gann analysis enthusiasts would see the price
through a Gann-based interpretation. In these cases and others, traders
accumulate experience on price patterns–albeit from different
perspectives. Some of the methodologies employed, however, are probably
totally worthless. It’s simply that instead of looking at prices through
clear glass, traders who use these methods are looking at prices through
different-colored tints. The method, or tint shade, is a matter of
individual preference. To extend the analogy, I would compare these
methods to nonprescription sunglasses: they change the view but don’t
necessarily improve the vision. The bottom line is that these methods
seem to work only because the people who use them have developed some
sort of intuitive experience about charting Fibonacci levels on price.

CF>That actually fits pretty well with my own view. People need to have
a perceptual filter that matches the way they think. The appropriate
perceptual filter for a trader has more to do with how well it fits a
trader’s mental strategy, his mode of thinking and decision making, than
how well it accounts for market activity. When a person gets to know any
perceptual filter deeply, it helps develop his or her intuition. There’s
no substitute for experience.

(I really don’t know if he discusses WHY ‘people need to have a
perceptual filter’ in the first place….)

:endif,

Well there you have a capsule summary of the perceptual filters
argument, without going deeper into it.

Then, there is the ’self fulfilling prophecy’. This is an interesting
argument, especially for those who don’t understand why some patterns
persist over time, while others are wiped out due to inventive
technicians discovering new market inefficiencies, greedily devouring
them (while they last) (yeah!), and then moving on when too many other
traders have caught on and moved the price out of the window of
observation.
Some patterns do seem, nonetheless, to survive. Are they real, or are
they merely self-fulfilling prophecies?

In their treatment of ascending right triangles (as I recall), Edwards
and Magee explain the dynamics of supply and demand that create this
pattern. In his book,’The Psychology of Technical Analysis,’ Tony
Plummer gives a scientific explanation for the Head and Shoulders
pattern, based on the principles described in his book, which are the
principles of Fibonacci numbers. He firmly believes that to be
successful in trading, you must have a system. He gives a sample system,
based on Fib numbers, towards the back of the book. (If anyone has
actually tested this system, I’d like to know what test you ran and what
the results were).

The question will arise…is it real, or is it Memorex? There are those
who work on the raw tested truth, rejecting everything that doesn’t put
up the numbers. There are others who get to know their perceptual
filters so well, they can just trade them for consistent gains. Markets
change, and our systems must also change. We make conscious decisions
about what we’ll change, and in that is a
subjective….discretionary….decision. Are our systems elaborately
disguised perceptual filters? I’m sure some serious system designers
will reject that idea as pure nonsense. Ideas are based on a logical and
objective process, a continuation and refinement of the implementation
of new data, whether knowledge or market stat. This also is the role of
the mind when recalculating based on new experience.

Well, those are the data from the poll. I hope you enjoyed the excellent
comments from many fine speakers as much as I did. I will attempt to put
the thread into a single, readable document, arranged by date, earliest
to latest. If I do so, I will be charting Fibonacci Levels here;

Regards,
Monte

Further Study:
Trading FibLevels with FibMaster

Forex Trading Using Fibonacci Levels

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