# Trading Fibonacci numbers



## James Austin (21 February 2009)

Some people swear by the validity and robustness of Fibonacci numbers as a support & resistance trading tool.

Below is an example using a FTSE futures 10min chart, from yesterday 20/2/09.

The yellow circle is the starting point (zero; green line 3947 on chart 1.) for setting the fib retracements for the start of the trading day. 

At each “significant” lower pivot (see coloured circles) the green “zero” line from the start of the day on chart 1., has been moved to that pivot point deemed significant. Ie., green line moved to green circle (chart 2), then to red circle  (chart 3), and so on. All the retracements (S&R) move in synch when the green zero line is moved.

(** what is and isn’t a significant pivot only becomes obvious in real time after some time has elapsed, or the next S or R has been broken, . . . . other ways to calculate???).

The charts, from a basic visual inspection, show the fibs to have some validity. 
How to filter out the breaks and translate the fibs into a trade plan, . . . . I’m not sure yet.

In sum, I’ve only just started exploring fibs, so I’m not advocating for or against.

*What do you think about fib numbers as a trading tool??*


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## tech/a (21 February 2009)

*Re: Trading Fibs*

In discretionary trading I use them as a point of reference.

One comment.
Your first chart and first Fib starting point should be from a significant high or low.
Dosent seem to be the case?
You can also get a read on the strength of moves by the retracement depths withi the primary move.
You can see it in your charts.


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## MRC & Co (21 February 2009)

*Re: Trading Fibs*

50% retracement level a definate significant level IMO.  Though, don't think it's part of his sequence?  Not sure why it's always added then, perhaps I'm wrong........

As for the rest of the numbers, I'm still not convinced.


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## James Austin (21 February 2009)

*Re: Trading Fibs*



tech/a said:


> In discretionary trading I use them as a point of reference.
> 
> One comment.
> Your first chart and first Fib starting point should be from a significant high or low.
> ...




thks tech,

the fib starting point you can see is the zero (the low of previous session), the 100% is off the chart (the high of the previous session).

fibs seem to offer "something", no doubt they cant be used mechanically, hence the skill requirement.


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## James Austin (22 February 2009)

*Re: Trading Fibs*



MRC & Co said:


> 50% retracement level a definate significant level IMO.  Though, don't think it's part of his sequence?  Not sure why it's always added then, perhaps I'm wrong........
> 
> As for the rest of the numbers, I'm still not convinced.





MRC

looking at the set-up for friday mornings spi (just gone), the 50% fib price was 3410 (refer chart)

price got to 3409 on the open, then retreated 60ish points.
so 50% was a strong level in this instance anyway.

monday (22/2), price is just above the new 50% at 3358, so an open above may equal support around 3358. we'll see!


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## James Austin (23 February 2009)

SPI fibs
worthy of further investigation I think.

*note:* i've only shown trade open points, not where trade closed.


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## James Austin (26 February 2009)

playing around with fibs on the SPI this am
worthy of some attention i think

spi opens 3325, just above fib 3324 = support 
moves up to the next fib 3349 = resistance
then down to fib 3307 = supprt

not complicated!


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## James Austin (27 February 2009)

testing 2 very simple tools on the SPI at present, 

fibs and the red & yellow indicator -- which calculates/estimates supply-demand levels in relation to a given price

the yellow circle shows price intersecting a significant fib @ 3350, the question is, will it break or bounce at this price? 

the supply-demand indicator is clearly headed down, signalling demand is diminishing at this fib level = possible short trade

****************

all looks nice and uncomplicated. 

but . . . . more testing and translating into a *real time* trading plan . . .


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## James Austin (27 February 2009)

last nights ftse made a high at 3934 shortly after opening.

6 or so hours later, after retracement down to the 50% fib line, price extended back towards the high of the day 3934.

a question most traders ask is, "_will price break the high or bounce away from it_?"

the supply-demand indicator shows a double top formation then a retreat a couple of minutes prior to the sessions high being reached for the second time in the session; representing *demand is exhausted* we have run out of buyers at the price

*enough evidence to take a short in real time at 3934???*


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## tech/a (27 February 2009)

Over the years I've posed this question to myself often.

"What is it that sees price resist/hold at levels,and why at specific levels often enough to catch traders eyes."

You are yet another who has seen this happen often enough to think it worth further discussion. Many thisnk it so worth while they develop or attempt to develop ways to see it occuring.

Personally I have come to the conclusion that its all about the herd---that group of traders who are involved in that snap shot in time.

If you take *any group* I hazzard a guess that a small majority will be quick to make decisions. (Small pull backs (.382 or/initial volume selling or buying at tops and bottoms)
The majority will take a while to react (50% retracements)
And yet another group will find pain at about .618 retracements.

On the filp side
Like numbers see value at .38/.50/.618/1 retracements.

As such these areas are only lines in the sand (To me) not concrete walls.
They are points to watch for concurring analysis--and to me this must be seen in crowd behaviour reflected in the participation in price.
I find this to be the range of bars and the volume traded.

Most would be looking for INCREASES in volume.
I however look specifically for the exact opposite this in itself is often a leading indicator.


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## James Austin (27 February 2009)

tech/a said:


> As such these areas are only lines in the sand (To me) not concrete walls.
> They are points to watch for concurring analysis--and to me this must be seen in crowd behaviour reflected in the participation in price.
> I find this to be the range of bars and the volume traded.





yes tech, well founded S&R are an excellent tool made even better if we can get a grip on *supply and demand* at those points . . . the missing link!

confidence increases when you have an estimation of supply/demand at any particular SorR.


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## tech/a (27 February 2009)

Have you noticed we seem to be the only ones in the Fib support group.

Think I'll have a drink.


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## James Austin (27 February 2009)

tech/a said:


> Have you noticed we seem to be the only ones in the Fib support group.
> 
> Think I'll have a drink.





not sure why? 

the charts above look pretty good!


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## James Austin (27 February 2009)

having fun with these charts, perhaps i should start a blog . . . 

ftse meets fib 3854, SDI gives plenty of notice re diminishing demand . . . and down she goes


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## Whiskers (27 February 2009)

tech/a said:


> Have you noticed we seem to be the only ones in the Fib support group.
> 
> Think I'll have a drink.




Support group, is it! I've just had a drink, but... what the hell it's friday, I'll have another. 



James Austin said:


> Some people swear by the validity and robustness of Fibonacci numbers as a support & resistance trading tool.
> 
> 
> *What do you think about fib numbers as a trading tool??*




Yes, I used to do some swearing when the market didn't respect support and resistance where I put it ... but seriously though, Fib is maybe my 4th or 5th line of indicators. I find it handy, after I get a feel for momentum, in the context of the previous moves, in terms of how far it may move. Sorta like a good plant operator or driver 'just knows' by the feel of the seat of their pants how things are going.  

Case in point the AUD/USD retraced 50 then came back to square before eventually retracing well over 61.8... looks close to 90... but I'm not thinking it's going to crash per se... looks like an expanded Flat correction, just the power and momentum of the swings throwing it around a bit.

For me I like to get really involved with my trade... get to know it like my own skin and when it moves like on a stroll it moves say 23.6 all's ok... when it starts getting a bit of grunt and momentum it should move much further... 50 or 61... if it don't i've started loosing touch. :

Anyways... gotta dash back to my AUD/USD... looks like it's coming back for another touch of bottom for me to get on... that's about 90% back on the precious major swing/wave... but it'll spring back with all that pent up thrust.


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## pilbara (28 February 2009)

*Re: Trading Fibs*



MRC & Co said:


> 50% retracement level a definate significant level IMO.  Though, don't think it's part of his sequence?  Not sure why it's always added then, perhaps I'm wrong.........



I agree that the 50% level is the most significant.  However it happens that the "golden ratio" (phi) in the fibonacci series is related to 50% by the fact that the first level 1/phi = 61.8%, and the second level 1/(phi*phi) = 38.2%, are equally spaced around the 50% level.  

You can think of them as important psych levels related to the 50% level. We are talking about what proportions look good to the human eye, and what proportions can be easily recognised by the human eye.  

A person can easily see that 50% retracement has happened.  It's so obvious because the amount lost equals the amount gained, 1:1

It's also very easy to recognise when the amount gained is still a much larger proportion of the amount lost, like a 10% retracement is 9:1.

This visual recognition works until you get to 2:1, where you have gained twice as much as you have lost, 66% to 33%.  

Once it drops below 2:1, it goes very quickly towards 1:1 (66 to 50), but there is a level in between these which still looks like you've got more than you've lost, that's golden ratio of proportion.  This is the perfect ratio where a rectangle doesn't look unbalanced.  Beyond this limit, the shape looks either too square or too rectangular.

So at 61.8% you are still convinced that you've gained more than you've lost, but once it goes in between the 61.8% and the 38.2%, it's effectively a 50:50 proposition.


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## James Austin (2 July 2009)

I've been testing what I call *Fib Boxes* (Fib = Fibonacci, . . . no surprises!!). 

I dont know why they work, but check out the blue arrows on *CHART 1*. Notice how price rountinely finds support or resistance at the Fib Box.

Now they are not perfect nor are they designed to be used in isolation, but you might find them useful as "further evidence". 

One way I've been testing and using them is to see if one of these boxes shows up where my chart is showing an area of key support or resistance, eg. significant high or low. But this is just one example, there are many ways Fib Boxes might be used.

I dont think many software packages have the ability to draw Fib Boxes, but they are actually quite easy to calculate and insert yourself. 

If you are interested in testing the Fib Box for yourself, *CHART 2, 3 and 4* will show you how to do it.

JA


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## feltonw (11 July 2009)

hi james your posts are most fascinating. Have you had time to play with fib fans? I dont know much about why they work other than apparently that they are the 'golden ratios' which always appear in nature. 

Have you had the opportunity to test out fib on FX? Ive been playing with FXCM demo account and they have some limited fib tools. very good for practice as all fx data are live.


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## Mr J (12 July 2009)

All very nice in hindsight, but use them in real-time. In many of those charts, the seemed to be resistance at a certain fib level that may have lead to an expectation of a reversal in real-time, only to see it punch through soon after. How would you deal with those? Wait to long and you're taking a bad price, get in to quick and you'll be stopped out on noise. There are too many fib numbers there in my opinion anyway, we wouldn't want to be taking guesses every 10-15 points to whether or not that resistance is significant or a little noise.


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## AverageJoe (15 November 2013)

Thought I revived discussion in this thread after 4 years!

I do use fibs a lot more so recently and  I have come to the conclusions that the generic 38/50/61 works well with stocks but not in the forex market. Anyone using other ratios and if so confluence points with indicators etc?


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## Boggo (16 November 2013)

AverageJoe said:


> I do use fibs a lot more so recently and  I have come to the conclusions that the generic 38/50/61 works well with stocks *but not in the forex market.*




Depends a bit on the time in Forex I find, the longer the time period then the more stable the pattern seems to be.
I tend to find the bigger picture then look within that for the smaller levels

Below is the daily of the AUD/USD which has played out a 5 wave sequence and is now around the 50% retracement area.
The two areas of significance in the correction are the 50% to 61.8% area and also the length of W.4 x 1.272 projected down from the high of W.5 (aqua blue box on chart) as an approximate cross check of the 61.8% retracement for pattern consistency and a more likely area of target retracement.

The AUD/USD is showing signs of reversing around the 50% area but for now corn:

Just my Forex/Fibonacci 

(click to expand)


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## pixel (16 November 2013)

AverageJoe said:


> Thought I revived discussion in this thread after 4 years!
> 
> I do use fibs a lot more so recently and  I have come to the conclusions that the generic 38/50/61 works well with stocks but not in the forex market. Anyone using other ratios and if so confluence points with indicators etc?




Fibonacci levels, while not the be-all and end-all, give me valuable "hints" where to look for support and resistance. If such a level coincides with an earlier turning point, the odds for a significant hold-up are increasing even more.
For more details, visit http://rettmer.com.au/TrinityHome/index.htm and click on the "Musings" tab.
http://rettmer.com.au/TrinityHome/Trinity/Musings.htm

Check out the 4th and 5th "On ..." from the bottom of the list of titles. That's what I use in all my templates, interpolation as well as extrapolation. (You may also be interested in some of the other articles on that blog.)


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## beachlife (5 December 2013)

the 62.5% level gave a big hint on the xjo monthly, and the 50% level on the range projection gave a nice confirmation on the daily xjo.  No surpises if 50% on the monthly becomes support again.  

Discloure - I am short the spi, have been for a while now.


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## Porper (5 December 2013)

beachlife said:


> the 62.5% level gave a big hint on the xjo monthly,




What's the relevance of 62.5%?


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## Garpal Gumnut (5 December 2013)

Porper said:


> What's the relevance of 62.5%?




A good site for fib.

http://www.trading-point.com/fibonacci

gg


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## pixel (5 December 2013)

Porper said:


> What's the relevance of 62.5%?




In the context of Fibonacci numbers: none.
The chart that showed 62.5% didn't use Fibonacci ratios, but steps of 1/8th. 
The percentages for that scale are -
12.5%, 25%, 37.5%, 50%, 62.5%, 75%, 87.5%, and 100%

Adding 1/3rd and 2/3rds into the mix reminds me of the old adage: *The beauty about ratios is that there are so many that you can always find one to prove your point.*


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## Trembling Hand (5 December 2013)

pixel said:


> In the context of Fibonacci numbers: none.
> The chart that showed 62.5% didn't use Fibonacci ratios, but steps of 1/8th.
> The percentages for that scale are -
> 12.5%, 25%, 37.5%, 50%, 62.5%, 75%, 87.5%, and 100%
> ...




LOL so now we have 12.5%, 23.6%, 25%, 33%, 37.5%, 38.2%, 50%, 61.8%, 62.5, 66%, 75% and 100%. That really would work every time.


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## beachlife (6 December 2013)

Porper said:


> What's the relevance of 62.5%?




It's me pressing the wrong button in my retracement tool setup.  I place the most importance on 50% and then like to see the Fibb numbers either side once 50% has been breached.  I also like to keep an eye on the 1/4's as well.  5/8 and 0.618 are so close its not significant.  5/8 is also the first in the Fibb division sequence that converges to 0.618.


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## beachlife (6 December 2013)

yep its all a load of rubbish, doesnt work on currencies either.


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## Porper (6 December 2013)

Trembling Hand said:


> LOL so now we have 12.5%, 23.6%, 25%, 33%, 37.5%, 38.2%, 50%, 61.8%, 62.5, 66%, 75% and 100%. That really would work every time.




My post was misunderstood. I wasn't asking what the relevance of 62.5% was I was highlighting the fact that it has no relevance whatsoever.

Agree as above, draw enough lines on a chart and you can pat yourself on the back every time and say you were correct. Of no help in trading whatsoever. I am not saying Fibonacci ratios are insignificant as I use them often but you need to know how to use them and when. Ideally in conjunction with other T.A. in my opinion.


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## Porper (6 December 2013)

beachlife said:


> yep its all a load of rubbish, doesnt work on currencies either.
> 
> View attachment 55712
> 
> ...




Beachlife, in your charts how have you made your projections?

It looks to me that you've measured from the prior high to the major low and then in hindsight noticed that pivot highs and lows have been made "around" the ratios. Even if you made the projection at the low point how do you know which ratios are going to be important reversal points?

Not being picky but maybe you can describe how you trade what you've shown in your charts. I am genuinely interested.


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## tech/a (6 December 2013)

Often pivots occur at fib ratio junctures and often not.
Fib should be used as another " indicator " indicating that at
The more important levels and in conjunction with other analysis
Something may occur.

Why it does happen is anyone's guess ---- but there is no denying it
Can and does happen. Just as the mathematics of a spiral occurs
Repeatedly in nature.---- don't know why---other than it fits---but it does.

The hard part is forward trading it.
Actually applying it to a setup and constructing a trading methodology
That is profitable ---- like GANN which has more possible setups than 
A side show.

On it's own it has little to no value in my opinion.
In a method it can be a helpful inclusion.


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## Trembling Hand (6 December 2013)

beachlife said:


> yep its all a load of rubbish, doesnt *work *on currencies either.




Yes a beautiful "proof" of concept and application to show it "working".


You guys are all stark raving mad! Markets don't move in straight lines and then flat line. They don't perfectly adhere to ratios either. Yes they trend then back fill a bit or a lot. They sometimes move back to old *areas *after the trends slow. Maybe 1/3 or a half or two thirds but to say they *conform *to Fibonacci ratios is stretching the available data. In a way only humans can see patterns in randomness.


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## beachlife (6 December 2013)

Porper said:


> Beachlife, in your charts how have you made your projections?
> 
> It looks to me that you've measured from the prior high to the major low and then in hindsight noticed that pivot highs and lows have been made "around" the ratios. Even if you made the projection at the low point how do you know which ratios are going to be important reversal points?
> 
> Not being picky but maybe you can describe how you trade what you've shown in your charts. I am genuinely interested.




Sure it does look like hindsight now that its over, but I use it in real time.  I use the retracement to see where a retracement might end.  Once the direction has changed I use the projection to see where the next move might end.  It is a projection of the previous range from the low and I use 100% as a target, and 50% as a possible resistance.  33% & 66% are for money management.  The concept of repeating ranges is probably more Gann that Fib, but they work well together.

So here is how I am using both to manage my current spi short.

The retracement shows that 38.2 aligns with previous support and resistance so is an area of concern.  The projection of the first down range gives a 100% point, where the market has now paused, and a 150% point that is a good match with the 38.2 of the range.  It also shows that it powered straight through 50%, a sign of strength in the move.  Normally I would take profits at 100% but for this trade I have moved stops to above 50% and set profit take at 150%.







I dont use them as entry points, I use them as setups for entry but wait for confirmation, and then use them for targets and stop placement.


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## Porper (6 December 2013)

beachlife said:


> Sure it does look like hindsight now that its over, but I use it in real time.  I use the retracement to see where a retracement might end.  Once the direction has changed I use the projection to see where the next move might end.




Yes I understand what you are saying but how do you know when a low is in? Great in hindsight. In real time you could project from any previous pivot lows that subsequently proved to be bounces only.

You wont (I.M.O.) be profitable longer term using that method alone unless in a raging Bull market...which we are not. Larger bear market counter trend move.


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## pixel (6 December 2013)

tech/a said:


> *Often* pivots occur at fib ratio junctures and often not.
> Fib should be used as another " indicator " indicating that at
> The more important levels and in conjunction with other analysis
> Something may occur.
> ...




yeah - what tech/a said


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## beachlife (6 December 2013)

Porper said:


> Yes I understand what you are saying but how do you know when a low is in? Great in hindsight. In real time you could project from any previous pivot lows that subsequently proved to be bounces only.




The low is confirmed when the counter trend move is over.  Some people use trendlines, some use moving averages, I use a swing chart and moving average.  

In early Nov, the Oct low was clear and I saw consolidation near the 50% level of the projection.  I knew it would do one of two things.  Go through it, which would have got me long, or bounce off it.  So it was time to just wait for confirmation.  I stopped scanning for new long trades, and tightened stops on open trades.  The bar on the 11th was an early sign that it may bounce, but I still waited for confirmation.  The bar on the 13th was a clear sign, but not an entry yet.  I did however start scanning only for shorts, and now have 5 other open shorts, all in profit and all but one with stops at profit or break even.

For the spi short I am in now I entered on 28th, based on confirmation with a moving average and swing chart.  Price had moved below the MA, and the swing chart was making lower tops and lower bottoms.  By 2nd Dec the swing high on the 25th was clearly confirmed so the projection down could be used for trade management.

For me its not about picking tops and bottoms, its about waiting for confirmation, using these ratios as just one of my trading tools.  If my entry trigger is not met, I will not take the trade.  If I have an entry trigger but a 50% level is close, I will not take the trade.  But when my trigger is in sync with the ratios then I'm in without hesitation.


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## BlackSky (8 December 2013)

tech/a said:


> Have you noticed we seem to be the only ones in the Fib support group.
> 
> Think I'll have a drink.




"Drink till it's gone"


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## BlackSky (8 December 2013)

Kindly explain a swing chart. Do they make these to use or is this something that one has to draw for themselves?                                                                         [/B]   







beachlife said:


> The low is confirmed when the counter trend move is over.  Some people use trendlines, some use moving averages, I use a swing chart and moving average.
> 
> In early Nov, the Oct low was clear and I saw consolidation near the 50% level of the projection.  I knew it would do one of two things.  Go through it, which would have got me long, or bounce off it.  So it was time to just wait for confirmation.  I stopped scanning for new long trades, and tightened stops on open trades.  The bar on the 11th was an early sign that it may bounce, but I still waited for confirmation.  The bar on the 13th was a clear sign, but not an entry yet.  I did however start scanning only for shorts, and now have 5 other open shorts, all in profit and all but one with stops at profit or break even.
> 
> ...


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## sails (8 December 2013)

BlackSky said:


> Kindly explain a swing chart. Do they make these to use or is this something that one has to draw for themselves?                                                                         [/B]




Some software will draw swing charts for you.  I have found that no individual indicator is a reliable stand alone and swing charts are no different. 

Here is a small selection of links from a quick google search of "swing charts":

http://www.investopedia.com/articles/technical/04/080404.asp

http://stockcharts.com/school/doku.php?id=chart_school:trading_strategies:swing_charting

http://www.stock-trading-infocentre.com/swing-charts.html


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## tech/a (8 December 2013)

BlackSky said:


> "Drink till it's gone"




Post number 2
From another quality poster
With nothing to add to the 
Community


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## tech/a (8 December 2013)

sails said:


> Some software will draw swing charts for you.  I have found that no individual indicator is a reliable stand alone and swing charts are no different.
> 
> Here is a small selection of links from a quick google search of "swing charts":
> 
> ...




Sails
They can't be used as a trading tool.
For the Same reason you can't use fib function in a trading systems test.
The last swing can't be confirmed until it has corrected the % chosen.

Let's take a 10 % swing 
You see a pivot and take the trade stop a few ticks above the
Pivot.
It drops 8 % swings back and adds 15 %
the original pivot disappears and just appears
As a high in a continuing trend.

This happens often-----before a swing pivot can be set in cement
By completing it's % swing.

Same happens with Kagi,Renko point and figure etc.


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## CanOz (8 December 2013)

tech/a said:


> Sails
> They can't be used as a trading tool.
> For the Same reason you can't use fib function in a trading systems test.
> The last swing can't be confirmed until it has corrected the % chosen.
> ...




I've been playing around with the 6E (Euro) on market replay, a Zigzag indicator with Fibb. I'll record a video and try to post it tomorrow. Then y'all can plainly see how useful this concept is or isn't...


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## sails (8 December 2013)

tech/a said:


> Sails
> They can't be used as a trading tool.
> For the Same reason you can't use fib function in a trading systems test.
> The last swing can't be confirmed until it has corrected the % chosen.
> ...





Hi Tech, I agree they can't be tested in a trading systems test.  I use them but probably not in the conventional way.  They are only a very minor part of analysis and definitely not used in isolation.  

I'm not recommending them - I simply provided some links I found with a 10 second google search in answer to a very broad question...


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## tech/a (8 December 2013)

sails said:


> Hi Tech, I agree they can't be tested in a trading systems test.  I use them but probably not in the conventional way.  They are only a very minor part of analysis and definitely not used in isolation.
> 
> I'm not recommending them - I simply provided some links I found with a 10 second google search in answer to a very broad question...




Fair enough.


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## beachlife (9 December 2013)

tech/a said:


> Sails
> They can't be used as a trading tool.
> For the Same reason you can't use fib function in a trading systems test.
> The last swing can't be confirmed until it has *corrected the % chosen*.
> ...




Not the type of swing charts I use.  I use Gann's way of drawing them, and they are based on highs and lows, not percentages, can be back tested and can be traded on their own profitably.  I use MAV and ATR with them as a filter, but I know some very profitable traders that just use swing charts and ranges.  They are a great way to remove the noise from the bar chart.


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## Trembling Hand (9 December 2013)

beachlife said:


> Not the type of swing charts I use.  I use Gann's way of drawing them, and they are based on highs and lows, not percentages, can be back tested and can be traded on their own profitably.  I use MAV and ATR with them as a filter, but I know some very profitable traders that just use swing charts and ranges.  They are a great way to remove the noise from the bar chart.




Can you give us some examples, either ones that come up in backtests or live discretionary?


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## tech/a (9 December 2013)

Trembling Hand said:


> Can you give us some examples, either ones that come up in backtests or live discretionary?




+ 1

When is a high a high.
When is it set in concrete.
The day it happens
A week after it happens?

You have EXACTLY the same problem.


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## Caveroute (9 December 2013)

tech/a said:


> + 1
> 
> When is a high a high.
> When is it set in concrete.
> ...




You can set up your analysis so for a high to be a valid high it needs to be the highest high n bars before and n bars after it appeared – so n bars after it appeared and its still the highest high over the past 2n bars, it’s a valid pivot that will never disappear - for the given 'n' level analysis.


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## tech/a (9 December 2013)

Caveroute said:


> You can set up your analysis so for a high to be a valid high it needs to be the highest high n bars before and n bars after it appeared – so n bars after it appeared and its still the highest high over the past 2n bars, it’s a valid pivot that will never disappear - for the given 'n' level analysis.




Yes you can
But many will disappear after n bars.
Trade it----
Code it and test it.
The " n " becomes the old % swing.
Which " n " do you choose to confirm the high and take the trade.
Too early too many stops
Too late trade is over.


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## Caveroute (9 December 2013)

tech/a said:


> Yes you can
> But many will disappear after n bars.
> Trade it----
> Code it and test it.
> ...




None will disappear after n bars, the rear view n bars after a  valid peak has been identified never changes.

I have coded it, and tested it - and yes I learnt the hard way until I adopted this approach.

n is an arbitrary number of your choosing. If you make it 1 you can build a pivot map of the entire chart which opens up a raft of pattern exploration options. 

Not that any of them seem to work particularly well, programmatically anyway, but that's another story.


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## tech/a (9 December 2013)

Caveroute said:


> None will disappear after n bars, the rear view n bars after a  valid peak has been identified never changes.
> 
> I have coded it, and tested it - and yes I learnt the hard way until I adopted this approach.
> 
> ...




I understand exactly what your saying.
Played with this about 15 yrs ago.
The bar that is identified a the pivot will remain that within n
But the chart will remain dynamic.
You can alter n's
After n bars and stay pivotal for a different n

Found exactly what you did.
Particularly in isolation.


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## beachlife (9 December 2013)

The simple answer for the swing chart questions is that there is a method for drawing them, so they are programable, hence can be included in software and therefore can be back tested and used in scans, and once a bottom or top is drawn it is set in stone and it's range can be used as a projection or retracement tool in what ever time frame you want.  

It's a bit like comparing a trend line to a moving average.  A trend line is subjective.  Different people will draw different lines on the same chart.  A MA is a formula and once drawn does not change and is the same no matter who presses the MA button.  The swing chart is a formula or more correctly a set of if then statements.  It is what it is and once drawn does not change.

Anyway back to topic, xjo & spi hit the 38% mark today, so now I look for two things, a move up where I wait for a swing top confirmation below 23% to take another trade down, or a move down where 50% is the next possible target.  For now tighten stops on the shorts, and patiently wait for confirmation.


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## beachlife (10 December 2013)

Here is how Fib help save me from a 12% of account loss on QBE.

On 30th Oct my scans flagged QBE as a possible long.  First step was to draw big picture Fib retracements.



The lines are to show the ranges - not trend lines.  I saw that 50% of the small range coincided with 23% of the big range.  Next was to draw the entry stop and 2:1 target to see how it fitted.




The target was well beyond the 50% level so I passed.

Had I taken the trade my trailing stop would have been below the 38% line which was just below the swing bottoms so I would have been stopped on open this morning for a 12% loss.



A good example of how being cautious about 50% can keep you out of dud trades.

Once it came back below 50% I have been waiting for a break below the swing bottoms, but unlike my CCL trade I didnt put orders in because the MMA was up, so I have been waiting for a confirmed break of the swing bottoms and the 38% level, ie where my stop would have been.  Waiting for confirmation means I just missed a 14% profit - that's life.

There will be a lot of very unhappy investors and options writers today.  But I am sure there will be a small number of aggressive traders that went short on the 29th once the first lower swing top confirmed at 50%.


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## tech/a (10 December 2013)

Again the example is shown in hind site.
If your so sure this works as perfectly as hind site
Put up 5 trades.AS IT HAPPENS WITH COMMENTARY.

I'll put up the usual $500 to Joe if you get 3 out of five 
To play out as your forward commentary.
Be specific.
2 or less I would hope you'd support your local ASF.


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## Caveroute (10 December 2013)

Tech is right, yes the are programmable but retrospectively.

Look at the rightmost bar as the action unfolds in the example provided earlier [at the bottom of the page] , or better still the final bar - the final top has been anticipated and cannot be confirmed until the following the day is over, and even then maybe not.

http://www.investopedia.com/articles.../04/080404.asp

Therefore you cannot make trading decisions based upon it and you cannot back test it. 

How can you backtest something when your anticipated buy signal disappears on the completion of the next bar. 

Try using the market replay option in tools like AB to actually see this happen.


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## beachlife (10 December 2013)

tech/a said:


> Again the example is shown in hind site.
> If your so sure this works as perfectly as hind site
> Put up 5 trades.AS IT HAPPENS WITH COMMENTARY.
> 
> ...




Of course it was an explanation after the event, sadly I cant show broker statements for trades I dont take.

If you think that this doesnt work thats ok, no one is forcing you to change the way you trade.  So just leave the thread for those that do believe in it to share ideas, and for those that want to learn.  If you want to argue, start a thread on politics or religion.

If you want to follow my trades the ccl was done in real time and is still live.  The swing chart has swung down today so stops can be moved to break even.  The swing is set in stone even though the day is not over.  My spi trade is still live with stops at profit and has been explained above.  That's 2.

Heres' my wbc, and amp, both live, both in profit, but of course they are hindsight now so no point talking about the entry and management logic.






Here's my oats, all over now, so yes hindsight, wont talk about that one either.




Here's my soy beans, live and just starting to move, but again entered without your scrutiny, so hindsight.




And here's one that failed aio.  But again hindsight so not worth explaining what happened.




The next one in my sights is oil,  I have provided enough for you to figure out how to trade it.


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## peter2 (10 December 2013)

Beachlife: Your application seems inconsistent to me. The swing should define the trend and the direction of your trade. In the first chart you marked the swing up and noticed the 38% - 50% pullback for a possible buy. You mentioned that you didn't take the trade due to the small R:R based on the swing down (pullback). Which swing defined the trade direction? If you become concerned by the 50% level of every small counter trend swing then you'll never start a trade. 

My suggestion for a more consistent approach: Trade the daily swings only when they match the weekly swing. As the weekly swing of QBE was down it would be logical to avoid daily swing buy setup and wait for a daily swing down sell setup. 

IMO scrap the fibs. The only retracement level worth looking at is the 50% level and it isn't a fib level. 

ps: I did buy the QBE near $15.00 as the ledge (after the swing down) was sitting on old resistance, which was at the 50% R level. Yes I lost 18% of the value of my QBE holdings but this was only 2% of my account.

PPs: Noticed that the QBE weekly swing direction changes depending on how you construct the swings (2-bar or 3 bar Gann swing).


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## Trembling Hand (10 December 2013)

beachlife said:


> Of course it was an explanation after the event, sadly I cant show broker statements for trades I dont take.
> 
> If you think that this doesnt work thats ok, no one is forcing you to change the way you trade.  So just leave the thread for those that do believe in it to share ideas, and for those that want to learn.  If you want to argue, start a thread on politics or religion.




Geesus dude! You were the one that claimed something could be back tested and traded. Tech And I couldn't see how that could be done, or actually what you were trying to get at so have asked a few times for more explanation. Each time you have got more defensive and more evasive and no doubt at the point now of wigging out. While still not showing how swing points can be back tested. Yet we are just asking for what you are trying to get at out side of a few selective post that are the "perfect" examples but have nothing to do with what we asking.

Here is a tip for nothing. Its a trading forum for people to *discuss *trading. You want try answering the questions? How do you back test, as you have claimed, something that is only set in hind site?


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## beachlife (10 December 2013)

Peter, my approach is consistant, but is probably different to what you do, so it may seem inconsistant to you.  I approach very setup the same, its profitable at a level that I am happy with.  I agree, I place the most importance on 50% which is strictly not a fib number, but the others are good for short term profit targets.

TH, I did answer your question.  Again, swing chart construction is a formula, so you can code it and test it.  Or you can manually back test by stepping through a chart one day at a time.  And then I gave real examples of how I trade it, including two that are current and live.  And of course the old trades that are real, are dismissed as selective.  As for sensible discussion, this from you who posts gems like  

_LOL so now we have 12.5%, 23.6%, 25%, 33%, 37.5%, 38.2%, 50%, 61.8%, 62.5, 66%, 75% and 100%. That really would work every time_

and 

_You guys are all stark raving mad!_

Your mind is clearly closed on trading with Fib, you are not here to learn or discuss, just to argue and demand proof, why you think you are so important that we should jump to your demands is a mystery, so just go away.


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## tech/a (10 December 2013)

> Here's' my wbc, and amp, both live, both in profit, but of course they are hindsight now so no point talking about the entry and management logic.
> 
> Here's my oats, all over now, so yes hindsight, wont talk about that one either.
> 
> ...




I'm sure we have some idea of how to trade it.
I'm also sure there is a good reason why we don't trade it.

When ever your ready to post up 5 in real-time
With commentary.
You don't even have to be trading them.
Just demonstrate how you pick a top OR Bottom.
I'm expecting a fib level to coincide with a top at which point you'll enter a short after N Bars with a projected Profit target at a fib level which will occur after another N bars
and you'll probably place a stop -----


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## Trembling Hand (10 December 2013)

beachlife said:


> TH, I did answer your question.  Again, swing chart construction is a formula, so you can code it and test it.  Or you can manually back test by stepping through a chart one day at a time.  And then I gave real examples of how I trade it, including two that are current and live.  And of course the old trades that are real, are dismissed as selective.  As for sensible discussion, this from you who posts gems like
> 
> _LOL so now we have 12.5%, 23.6%, 25%, 33%, 37.5%, 38.2%, 50%, 61.8%, 62.5, 66%, 75% and 100%. That really would work every time_
> 
> ...




Nah dude. Back testing stepping through a chart manually* is not back testing.* And your swing points are only confirmed swing points well after they are set so therefore useless to a systematic backtest as per your claim. That is what I was wanting to see after you claimed that you had back tested proof - I was firstly wondering how you did it suspecting at best you had a coding error but you haven't actually back tested. So you are right there is no point discussing it. Because you haven't got any proof of it working.


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## beachlife (10 December 2013)

tech/a said:


> I'm sure we have some idea of how to trade it.
> I'm also sure there is a good reason why we don't trade it.
> 
> When ever your ready to post up 5 in real-time
> ...




WTF 
I never claimed to pick tops or bottoms
I never said I trade or predict the future using N bars

Now I get it.  You have assumed that I am claiming to predict the future?  Nope.  Never said that.  You must have missed the part about waiting for CONFIRMATION before entering and MANAGING a trade with stop losses once in.

If thats what you think then you have no idea how to trade using Fib tools.  FYI there is 179 books on Amazon if you want to learn about it.


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## tech/a (10 December 2013)

beachlife said:


> WTF
> I never claimed to pick tops or bottoms
> I never said I trade or predict the future using N bars
> 
> Now I get it.  You have assumed that I am claiming to predict the future?  Nope.  Never said that.  You must have missed the part about waiting for CONFIRMATION before entering and MANAGING a trade with stop losses once in.




No wrong again.

At sometime you must take a trade at that time you'll have decided that you have confirmation that that's a pivot high or a pivot low---this is what you have shown in hind site on the charts you have provided.

What I'm asking for is the EXACT point in real-time where you post a chart with commentary showing the Fib trade in detail from start to finish.

Now for an experienced fib trader like yourself that shouldn't be too hard---surely.



> If that's what you think then you have no idea how to trade using Fib tools.  FYI there is 179 books on Amazon if you want to learn about it.




I probably wrote one of them.


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## beachlife (10 December 2013)

tech/a said:


> What I'm asking for is the EXACT point in real-time where you post a chart with commentary showing the Fib trade in detail from start to finish..




Oh so what you are saying is that I am a liar and that the trades that I have posted were based on some other trading method and I am just pretending that I use Fib in my trading.  Damn you caught me, I confess, I really trade by moon cycles with the help of my dart board.  Shame on me.  I guess I should also confess that I am not watching oil with Fib and swing charts, I am just waiting for the full moon.  Oh and ignore everything I have written in the CCL thread, for that one I used Venus.


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## tech/a (10 December 2013)

beachlife said:


> Oh so what you are saying is that I am a liar and that the trades that I have posted were based on some other trading method and I am just pretending that I use Fib in my trading.  Damn you caught me, I confess, I really trade by moon cycles with the help of my dart board.  Shame on me.  I guess I should also confess that I am not watching oil with Fib and swing charts, I am just waiting for the full moon.  Oh and ignore everything I have written in the CCL thread, for that one I used Venus.




No not that either.
Just 5 trades start to finish in realtime.
Put up your next oil trade if you like.
Whenever your ready.


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## beachlife (19 December 2013)

tech/a said:


> Whenever your ready.



Ok after watching and waiting for confirmation it just went live on Feb CL.  Here's how it went.

Price hit resistance and rallied from 61% of first range, but the first break out bar finished under 38% and too close to 50% of the down range (2nd pic) so no point chasing it, wait to see where pullback forms.  



Pull back started at just under 50% of most recent range down, and confirmed the run up as an expanding range so now looking for swing bottom on pullback.  It confirmed above 50% of the last short run up adding strength to the move. 




It is also above 50% of the first range (see first pic) adding weight to the strength of the move.  It was also above the previous two swing highs.  But it was only a slight swing up so waited to see what the next bar did.  It closed just above 38% (see above) and took the swing higher.  Price is above MMA and volatility is low so expected to rise.  I want in now.







First check that 2:1 target fits, happy that it is at 61% and is within the 100% range projection (not drawn) with stop just below the swing bottom....I'm in at 97.95. 




$99.15 at 50% will be danger point and time to tighten the stop, unless it powers through it, then stops can be just under it.  

A lot of Fib and Gann saying oil should rally, so a perfect time for the nay sayers to go short.


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## beachlife (20 December 2013)

The price went up through 50% but closed below it, so stops tightened to just below the 38% level at 97.16.


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## beachlife (20 December 2013)

Here is the next one I am looking for.

The aud daily after turning around at 50% has just completed 100% of the range and looks like a double bottom.





So now check the weekly chart which shows the price may be headed to 50% (0.855).  So on the daily chart I am looking for a swing top to form under 0.9146(38%) and will then take a short if I can get 2:1 before 0.855 (50%)


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## Boggo (20 December 2013)

I don't trade Fibonacci numbers as such but their significance cannot be ignored especially when used in pattern following analysis. 

Those familiar with Fibonacci will see the relationship of the retracement, expansion and extension on the daily chart of TLS.
(click to expand)


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## Valued (21 December 2013)

I don't understand Fibonacci retracements. What it looks like to me is that you assume a stock will retrace back a certain percentage that is based on a generalisation of Fibonacci numbers then when that happens you use T/A to look at whether you can expect a reversal. At that point you choose to buy or to sell. The only way that this makes sense is if stocks have a reason to retrace back to those Fibonacci points. I can't see any reason why they would or should. In this sense, they are arbitrary. 

Is there some reason why this should work? Even if there was some tendency for this to occur, there is a lot of noise traders and investors need to be aware of. News reports and companies announcements may send the market into a spin that destroys any usefulness of a technical indicator.


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## Valued (21 December 2013)

beachlife said:


> Here is how Fib help save me from a 12% of account loss on QBE.
> 
> On 30th Oct my scans flagged QBE as a possible long.  First step was to draw big picture Fib retracements.
> View attachment 55748
> ...




I don't understand something. At what point were you thinking of going long and decided not to? Why do you need fib numbers to figure out not to go long? Can't you just eye ball the chart and see it is in a downtrend and then not put your money in or do you mean you were considering going long before the down trend?


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## beachlife (22 December 2013)

Valued said:


> I don't understand Fibonacci retracements. What it looks like to me is that you assume a stock will retrace back a certain percentage that is based on a generalisation of Fibonacci numbers then when that happens you use T/A to look at whether you can expect a reversal.
> 
> Is there some reason why this should work?




Yes the idea is that a stock will retrace by percentages as you say, and also that a stocks next move will occur in percentages of the previous move (projection).

Why, I have no idea.  Our knucles are spaced at Fib ratios, so are our teeth, sea shells, spider webs, dear antlers.  I dont know why I just accept that it is.  Same for the markets, I just can see it is reliable, but the most reliable is the 50% level which is not a Fib number, its a Gann thing but most Fib tools have it.

The next 3 charts are xjo.  Why did the average of 200 stocks top at 50% of the projected range, I dont know, but I knew 50% was coming so I stopped trading long just in case.  When it confirmed as a top I only scanned for short trades and also shorted the spi.  Why did the latest bounce occur again at 50%, I dont know.  Why did the market stop its recovery at 50% of the gfc run down, I dont know.









I use it in two ways.

1.  Its on the charts I watch, so for oil I was watching the 61% level - more on that later.
2.  When I run a moving average scan, if I get a result then I use Fib to look for targets and possible resistance levels, so its used not to find an entry but to find a target and to see if the trade has room to move once a possible setup has been found.

So back to oil, in Oct it went straight through 50% so I started watching 61%, and it bounced, but days later bounced back from 50%.  




It then formed a consolidation under 61%, so I wanted a break above that before going long.  That happened, so I had a look at a possible long.  I saw that if I placed stops under 61% and target just under 50%, it didnt provide 2:1 risk reward so I left it.





So next I wanted a pullback that would happen above 61% which it did as explained in previous post.  50% was still a worry but the swing bottom above 61% is a sign of strength that wasnt there before.

An of course now oil is struggling to close above 50%.  Why I dont know, but its a good time to tighten stops just in case it becomes resistance again.

So Fib is not an entry, it's a look into possible problem points and is used for targets, stops and keeps me out of  lot of trades.


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## beachlife (22 December 2013)

Here's a few more from oil Spot V chart, and for me the more it has happened in the past, the more likely it will continue to work.  But the key is to wait for confirmation.








and here is just one of those things.  The current 50% problem level on the Feb chart just happens to also be the 38% point on the spotV chart of the last down range but also 50% on the spotV of the last major range up.


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## Valued (22 December 2013)

Thanks beachlife for taking the time to respond. I think I am going to have to look at a lot more charts. Given how many charts there are over many time frames for many different things then some are bound to follow any pattern. The important part is that if this happens a good more often then it should statistically over a large sample. 

Has anyone ever used some sort of scans to backtest this over large sample sizes to rule out the possibility of selection bias and confirmation bias?


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## tech/a (22 December 2013)

Valued said:


> Thanks beachlife for taking the time to respond. I think I am going to have to look at a lot more charts. Given how many charts there are over many time frames for many different things then some are bound to follow any pattern. The important part is that if this happens a good more often then it should statistically over a large sample.
> 
> *Has anyone ever used some sort of scans to backtest this over large sample sizes to rule out the possibility of selection bias and confirmation bias?*




I keep pointing this out and I keep getting the same idiotic replies.

You cant.
You need to use the Zig Zag function.
The last leg is dynamic and cannot be set in stone until the % retracement or move forward is replaced by a move in the other direction --greater than the % nominated.
So any test will be in accurate.

*Here is what Happens pretty well all the time when trading forward. (REALTIME)*


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## Valued (22 December 2013)

People actually think it's a good idea to go long there? I just eye balled that first chart for a few seconds and thought it would be better to stay in cash. I think anything you do there given just that information on the chart is a gamble and there is not enough edge one way or the other. I can see why people lose money trying to use obscure signals.

I of course can be wrong and someone like you T/A might say "well obviously we short there" but I don't think this is the case. I think this is a situation where the risk/reward ratio just isn't there. It may be that if we zoomed out to the 3yr and 5yr weekly charts it may paint a different picture of a long term up trend that isn't shown there but given that 6 month chart alone, I don't think we can trade this stock profitably at the point we would be at in real time in the first chart.


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## beachlife (22 December 2013)

Once again, the key is WAIT FOR CONFIRMATION.

Tech/a's example is clearly an example from someone that has no idea.  When it appoaches 50% you wait for confirmation of the rally by a breaking of tops, and when it fails, and heads south, you go short when the bottoms are broken, and then you use stops because nothing is guaranteed 100% of the time.


As for back testing, by code not so easy, manually like we did before everyone could write code, no problem.


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## tech/a (22 December 2013)

beachlife said:


> Once again, the key is WAIT FOR CONFIRMATION.
> 
> Tech/a's example is clearly an example from someone that has no idea.  When it appoaches 50% you wait for confirmation of the rally by a breaking of tops, and when it fails, and heads south, you go short when the bottoms are broken, and then you use stops because nothing is guaranteed 100% of the time.
> 
> ...




Ok I'll play
What do you look for for confirmation
First bar break up or down,
Second,third. Fourth
When do you take the trade
When is it confirmed
?


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## Porper (22 December 2013)

beachlife said:


> Once again, the key is WAIT FOR CONFIRMATION.
> 
> Tech/a's example is clearly an example from someone that has no idea.  When it appoaches 50% you wait for confirmation of the rally by a breaking of tops, and when it fails, and heads south, you go short when the bottoms are broken, and then you use stops because nothing is guaranteed 100% of the time.




Breaking of tops? What tops? The major one... a minor pivot high? And likewise if price breaks a "top" then fails why would you go short". As in what analysis says it will trend lower?

Why not just show a live example with no hindsight? That would be good.

I.M.O trading purely Fibs will result in a $0.00 account balance eventually.


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## beachlife (23 December 2013)

Porper said:


> Breaking of tops? What tops? The major one... a minor pivot high? And likewise if price breaks a "top" then fails why would you go short". As in what analysis says it will trend lower?
> 
> Why not just show a live example with no hindsight? That would be good.
> 
> I.M.O trading purely Fibs will result in a $0.00 account balance eventually.




You people are so intent on arguing for the sake of it that you are not reading what I have said.

What Tops/Bottoms/confirmation -  see post #46

Live example - See post #67 and CCL trade https://www.aussiestockforums.com/forums/showthread.php?t=27716&page=2  Both commented on before entry, both updated in real time, both still open.




Hindsight - ummm hang on, tech/a's failure example was hindsight, with ridiculous entries, not relevant to anything I have said, just to show a failure.  My so called hindsight trades are real.

Purley Fibs - never said that.

Account balance $0 - LOL....Far from it.


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## beachlife (23 December 2013)

beachlife said:


> Here is the next one I am looking for.
> 
> The aud daily after turning around at 50% has just completed 100% of the range and looks like a double bottom.
> 
> ...





The swing chart made a bottom on Fri which means that a swing top is next.  That allows me to place a sell on stop order just under the price that will confirm the swing top.  2:1 RR is possible before 50% on the weekly, so the order has just been placed at 0.8850, with if done stops and target.  I will continue to adjust it each day until filled or trade invalidated, depending on what the swing chart does.  Who knows this just might be the one that costs Tech/a $500, assuming oil behaves itself over Xmas.


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## Valued (23 December 2013)

Which broker is that beachlife?


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## tech/a (23 December 2013)

Beachlife

The point I'm making and others is that with or without 
Your idea of " confirmation " fib hasn't a better success rate than random entry.
So better than 50 % win rate
Personally I think your confirmation as a trading tool is poor.
My $500 and I'm sure yours stands ready to go if you can trade 3 of 5 profitably.
Or 6 or 10.

Fib to me after 20 yrs of trading designing and testing T/A is no more than an amusing
Coincidence seen "at times" on lots of charts.
It's benefit as a trading tool in my experience---- next to zero over a number of trades and charts.
There is so much you can calculate on a chart ( just look at GANN ) that you'll find something that fits perfectly on any chart at sometime or other.
Turn it into a profitable trading methodology as it happens ---- vastly different.

But hey watching with interest.


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## ThingyMajiggy (23 December 2013)

tech/a said:


> Beachlife
> 
> The point I'm making and others is that with or without
> Your idea of " confirmation " fib hasn't a better success rate than random entry.
> So better than 50 % win rate




I would love for someone to start a thread and do some trades that are purely random entries yet managed very well once in the trade, because I think a lot of these "methods" or "strategies" are not much better than random. Would be very interesting to see the difference if any, between random entries and excellent management once in the trade vs some of these methods.


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## tech/a (23 December 2013)

ThingyMajiggy said:


> I would love for someone to start a thread and do some trades that are purely random entries yet managed very well once in the trade, because I think a lot of these "methods" or "strategies" are not much better than random. Would be very interesting to see the difference if any, between random entries and excellent management once in the trade vs some of these methods.




Very true Sam.
This has been my experience over many
1000s of Hrs of testing trading and researching.


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## ThingyMajiggy (23 December 2013)

tech/a said:


> Very true Sam.
> This has been my experience over many
> 1000s of Hrs of testing trading and researching.




Begs the question what actually is an edge? Or better yet how can you prove it's an edge, what makes something an edge vs a random entry with good management? Gann, Fibs, TA, all aren't actually edges as its been discovered via analysis. An edge from what I can tell is something that can best anticipate instead of confirm, by the time you get confirmation you should already be in the trade it seems.


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## CanOz (23 December 2013)

Sort of reminds me of trading with a divergence indicator, works well when it works...which is usually looking back over a chart.

I recorded a session on the 6E with the zigzag indicator with fibb retracements switched on. It works sometimes but as stated where do you enter, the 50, the 61.8? It appears to work well when the fibb coincides with another area of support/resistance. 

I think if you use this as a means to help you pull the trigger and its all working well statistically for you then fine...go for it. Whatever works is what works.


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## Porper (23 December 2013)

CanOz said:


> Sort of reminds me of trading with a divergence indicator, works well when it works...which is usually looking back over a chart.
> 
> I recorded a session on the 6E with the zigzag indicator with fibb retracements switched on. It works sometimes but as stated where do you enter, the 50, the 61.8? It appears to work well when the fibb coincides with another area of support/resistance.
> 
> I think if you use this as a means to help you pull the trigger and its all working well statistically for you then fine...go for it. Whatever works is what works.




Trading Fibonacci on its own isn't successful in my experience.  You need to at least use it with Elliott Wave Theory and ideally some time cycles as well. E.Wave, despite it not being the Holy Grail provides logical entry points/targets. Just saying "once the move has confirmed" means absolutely nothing without reasoning.


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## Boggo (23 December 2013)

Porper said:


> *Trading Fibonacci on its own isn't successful in my experience.  You need to at least use it with Elliott Wave Theory and ideally some time cycles as well.* E.Wave, despite it not being the Holy Grail provides logical entry points/targets. Just saying "once the move has confirmed" means absolutely nothing without reasoning.




Agree, a valuable guide when used with pattern analysis imo.


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## Valued (23 December 2013)

What edge is in share trading is an interesting topic. I think the only way to compare it appropriately is to compare it to the zero sum game of poker. In poker you only profit off other people's mistakes. If everyone played perfectly then no one would ever make any money. On the stock market, if everyone invested perfectly then shares would always be at their intrinsic value so you would go for shares that offer the best returns on equity or capital etc. People don't invest perfectly and they trade on emotion. When someone makes a mistake and you take the other side of it, you win. The difficulty is being able to take the right side a good amount of the time.

Interestingly enough, if you apply poker math to the stock market, you can easily reason you don't have to win as many trades as you think you do. A 2:1 ratio means that minus brokerage fees you only have to be right 33% of the time to break even. If you are right 40% of the time you profit. You are just trying to be wrong less than other people are wrong. If you chose random entry points but worked with stocks with high volatility in that any potential pay off is going to be within a high range but your stop loss stays as a constant %, then you might be able to profit no matter when you enter since some of the time you will buy at support, sometimes at resistance, sometimes in the middle somewhere. The difficulty is that there will be a tonne of variance which is why you want to consider always trying to buy at the support level.

I think edge comes from risk analysis. I am very surprised no one has taken the g bucks principle from poker and applied it to risk analysis in stock trades. I googled and it has never been done from what I can see. I suspect it's because anyone good enough at poker to be using g bucks would likely be playing poker and not trading stocks. Poker players are miles ahead of retail traders when it comes to risk analysis. It may be also difficult to adapt. You need to understand what sklansky dollars are first. This is simply the average you would win on that particular trade if you could repeat it an infinite amount of times. G bucks is comparing the equity of your hand in poker to your opponents hand range. In the stock market you would compare your stop loss to the range of prices in which a stock might be expected to rise using some kind of measurement that would capture almost all trades such as bollinger bands e.g. a stock that might give you up to a 4:1 risk/reward ratio but most of the time only give 2:1 is better than a stock that will give you only up to 2:1 and no higher (a fake situation but toy games are how you analyse game theory in poker and I don't see why it won't work for the stock market too).


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## Trembling Hand (23 December 2013)

Valued you are talking about using the tendency of a financial instrument to display "trending-ness" to skew your numbers in your favour.

I'm pretty sure an "edge" can be found and once it is you will have a win rate above 50% AND an R:R above 1:1.


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## beachlife (23 December 2013)

Valued - broker is Cityindex

Edge - I am not looking for an edge or to beat the market, I am looking for positive expectancy by following the market.

Here's the next one - short WOW - stop entry order, if done stop and target have been placed.

Pretty simple.  If a swing top is confirmed under 50% and 61% is broken my order will trigger.  2:1 target before 100% is possible.  So entry below 61% and stop above 50%.  Prior consolidation at 38% and 2 bounces of 61% add weight to the significance of Fib on this stock.  If the stock rallies up through 50% order will be cancelled.

CCL stopped out today, small profit of 0.4xRisk, that's 1 of 5.


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## beachlife (23 December 2013)

Valued, I use 2:1 because I have found that going for bigger moves with a trailing stop used to get me stoppped out at less than 2:1 and as you say you only need 33% for BE (I am at 67% for the year - not 67% for full profit, 67% for some profit, so not all at 2:1).  Here are some real examples of trades I did.

AMP - could have got a bit more, stop above consolidation would have been out about the same.




WBC - Nice, no more in it and target hit intra day.




NCM - oh well you get those sometimes.




And you can see CCL didnt get there at all.

And of course around 4 out of 10 make a loss.


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## tech/a (23 December 2013)

Beachlife

Haha.
Your not getting it that easy.
CCL was already in Profit when the challenge was launched.

(And seriously .4% of R---your saving face!! Didn't even reach your stop.)

Actually just checked I'll accept CCL. All be it a bit sus!

Would you mind expanding the chart and showing me the trade and Fib settings from where to where?

*WOW is exactly the type* of set up I am talking about.
If you have 4 others then we have a Comp!

Clear concise and un ambiguous.


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## tech/a (23 December 2013)

*WOW*

Only to show there are many ways to interpret the SAME chart.
Weekly to Daily








If we look at THIS Fib analysis its telling us its in a *strong up trend*.


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## Valued (23 December 2013)

Interesting that you chose to short wow. I wouldn't have traded wow at that entry but rather would have gone long the day after that pivot point (the day the stock went down). I was thinking about buying then too but decided not to. I probably wouldn't have traded this stock at all on the day you did but If I had to choose for a short term trade to Jan 1st I would have gone long. 

It will be interesting to see how it works out for you


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## beachlife (23 December 2013)

tech/a said:


> Beachlife
> 
> Haha.
> Your not getting it that easy.
> ...




Your complaint was about hindsight, and ccl was clearly documented from before entry, nothing sus about it, and even more valid as no fudging because of your challenge.  Here's the charts with the clutter removed.

CCL big range - top at 38%



CCL most recent up range - turn at 61%



CCL range projection used because there was nothing left in the range to base targets on.


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## beachlife (23 December 2013)

tech/a said:


> *WOW*
> 
> Only to show there are many ways to interpret the SAME chart.
> Weekly to Daily
> ...




I cant see any sign of a strong up trend, I see weekly sideways and daily down, but if that's what you think trade it then.


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## beachlife (23 December 2013)

Valued said:


> Interesting that you chose to short wow. I wouldn't have traded wow at that entry but rather would have gone long the day after that pivot point (the day the stock went down). I was thinking about buying then too but decided not to. I probably wouldn't have traded this stock at all on the day you did but If I had to choose for a short term trade to Jan 1st I would have gone long.
> 
> It will be interesting to see how it works out for you




It's not a live trade yet.  The orders are live stop orders so they wont trigger until the swing top confirms.


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## beachlife (28 December 2013)

Oil Trade

The 50% Fib level has finally been broken, so now stop moved to just under that level at $98.87 which is also just past the price at where a swing down would be confirmed, and just under the swing top around 11th Dec.  So 3 reasons to put it there.  

View attachment 56028


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## beachlife (30 December 2013)

aud/usd trade just triggered.


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## Valued (1 January 2014)

I keep looking into this and the more it sounds like BS. 

Firstly, 50% is not a fib level. I don't know if there is anything special about 50% but I suspect if markets have a tendency to retrace back to 50% and reverse then it's because people like stuff for half price:

Secondly, there does not seem to be proof that the golden ratio occurs in nature on a wide and systematic basis. Given how wide nature is, any number/ratio can be made to fit something. The problem with fib ratios is that investigation seems to dictate that it doesn't quite stack up. Sometimes it doesn't fit the golden ratio exactly or other times are just assumptions that have not been tested. Often no one has even measured something and posted the results online. 

The fact that the golden ratio is used in anything man made is not very convincing. Man, obviously being aware of the golden ratio, may seek out to create something in line with that ratio. Therefore, we must look to occurances in nature.

I can't seem to find anything online that proves that the golden ratio appears in nature any more then it statistically should (presumably any ratio could occur somewhere if you look hard enough). I even found an article that said a sea shell spiral that is logarithmic may not actually be a golden ratio rectangle, if you actually measure it: https://www.sciencenews.org/article/sea-shell-spirals


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## beachlife (2 January 2014)

Valued said:


> I keep looking into this and the more it sounds like BS.




It's probably best that you dont attempt to trade by it then.

For tech/a
Oil turned down just shy of 62% and although it closed at 50%, the next session it went through and hit stops, so out for 0.6x risk profit.  Wont look at long again until it gets above 61%.  If we get a lower swing top below 50% then I will be looking for a short.  Between 50% and 61% I stay out.



AUD/USD
Here is  the chart with the trade points shown.  Stop is just above 50% of the last down range, and target is at 50% level from the weekly chart.  The trade triggered and straight away went in the wrong direction, but has made a bar top at 38% and then went back down to close towards the low.  But the day of the trigger also formed a higher swing low, so it will be an interesting few days to come.


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## Valued (2 January 2014)

Well I clearly arn't going to trade by it unless it can be proven/makes sense. 

Even the pyramids which are said to be made with the golden ratio arn't. Giza is 756 feet high and 481 feet wide or 1.5717 ratio. I assume things have to actually be 1.618 and not just close to it.

One website claims this:

A DNA molecule measures 34 angstroms by 21 angstroms at each full cycle of the double helix spiral. In the Fibonacci series, 34 and 21 are successive numbers.

So what? It equals a ratio of 1.619...? When talking about the golden ratio appearing in our DNA, one would think you would have to be exact, not just pretty close. If DNA is wrong you end up a vegetable. Clearly it's not supposed to be 1.618 but rather 1.619. People do this with markets all the time. They make up fib levels that don't exist (50%) or are lax about the requirements i.e. "Ah well 1.70 is very close to 1.618, it must be reversing soon". If such inaccuracies are accepted then you can say that anything occurs at a fib level, especially when you make up new fib ratios!

Even if this is the case, it doesn't mean it can apply to human psychology. Perhaps the ratio is something that just works, like pi, but it doesn't mean groups of millions of people can as a herd gravitate towards this ratio in an infinitely complex market. Such a claim requires extraordinary evidence. By making such a claim you are saying that you don't believe markets move by supply/demand or that they only move via supply/demand up to certain points before they reverse. There may be a self-fulfilling prophecy somewhat though.


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## beachlife (2 January 2014)

Valued said:


> Well I clearly arn't going to trade by it unless it can be proven/makes sense.
> 
> Even the pyramids which are said to be made with the golden ratio arn't. Giza is 756 feet high and 481 feet wide or 1.5717 ratio. I assume things have to actually be 1.618 and not just close to it.
> 
> ...




You are correct, it's not 100% accurate 100% of the time - just like trendlines and patterns.
It may be a self fullfilling prophecy, just like trend lines and patterns.
It is drawn with the benefit of hindsight based on old data - just like trend lines and patterns.
The old data is used to project possible points of concern in the future, which sometimes dont pan out -  just like trend lines and patterns.
Some people can trade them well, some cant - just like trendlines and patterns.
Most people dont use it and dont belive it works, what's that stat again, around 90% of people fail at trading.

50% is Gann, not Fib, correct again.

It works for me, most likely wont work for anyone that expects it to be an exact science.


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## beachlife (2 January 2014)

WOW just closed above 50% and made a higher swing bottom and higher swing top so orders for short trade have been cancelled.


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## beachlife (7 January 2014)

aud/usd stop above 50% was taken out over the break for 1x risk loss.


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## beachlife (8 January 2014)

Here is the next one - March Coffee

50% has been significant in the past and 2:1 profit target is below it.
38% has been significant in the past and it is above 1:1 risk reward so will be a point to move stops.
Entry @ $122 is above 25% which has been significant in the past - yes it's also Gann.
Stop is below where 1 day swing chart would turn down.
MMA has turned up.
recent swing tops have been broken.
2 day swing chart has higher tops and higher bottoms.

Ticks all the boxes.

Has been filled in elec market so is already live.


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## Trembling Hand (8 January 2014)

beachlife said:


> Here is the next one - March Coffee
> 
> Ticks all the boxes.
> 
> Has been filled in elec market so is already live.




I assume this is a CFD? What is the spread on these things?


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## beachlife (8 January 2014)

yes its a cfd, spread is 0.9.  I have increased my account for this year so the spread is getting a bit big so am organising a futures account but its not done yet.

Didnt start as I would have liked so now I use last nights bar to check the ranges and see where the stop is.  There are 2 ranges to look at.  For the small range the stop is right at 61%, and for the bigger one its just above 50%, so I will move it to just under the 50% level to try and avoid being stopped during an intra day spike like happened with aud/usd trade, so new stop is 114.


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## beachlife (10 January 2014)

I got into this at the close yesterday and had to go out, so tech/a gets a hindsight reprieve on this one.

Rio gave a signal on the daily.  Check of the weekly showed two almost touches at 61% in the past and a reversal at 50%.




Daily showed 2:1 possible by 38% so I was in short at 65.20.




Stop now at BE.  Hindsight by a day, but real.




(the sugar trade is at the end of its run and is well below 61% so there were no Fib numbers worth looking at so it wasnt posted, just a moving av trade.)


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## beachlife (20 January 2014)

Looks like the reprieve was mine.  Stopped out when it gapped over the BE stop for 0.5x risk loss.


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## beachlife (20 January 2014)

Watching this potential swing top at 38% on March oil which will also be just under 50% of the last major move up on the weekly spot V.


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## beachlife (23 January 2014)

No entry on oil, an example of how waiting for confirmation helps to avoid losing trades (just like QBE 'hind sight' example), see what happens now that 61% is nearby.



IAG.  Another one day late by a day, so now a hindsight trade.  Was looking for a possible turn at 50% so entry was placed below recent consolidation low bar.  Orders were placed last night, it had closed at the high so I didnt expect it to fill today so went to bed, but it did.


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