Australian (ASX) Stock Market Forum

An attack on Fibonacci numbers...

Jump to new
Fibonacci Flim-Flam

http://www.lhup.edu/~dsimanek/pseudo/fibonacc.htm



The "golden spiral" is a fascinating curve. But it is just one member of a larger family of curves/spirals collectively known as "logarithmic spirals", and there are still other spirals found in nature, such as the "Archimedian spiral." It's not difficult to find one of these curves that fits a particular pattern found in nature, even if that pattern is only in the eye of the beholder.

But the dirty little secret of all of this is that when such a fit is found, it is seldom exact. The examples from nature that you find in books often have considerable variations from the "golden ideal". Sometimes curves claimed to fit the golden spiral actually are better fit by some other spiral. The fact that a curve "fits" physical data gives no clue to the underlying physical processes that produce such a curve in nature. We must dig deeper to find those processes.
Click to expand...



http://www.cass.city.ac.uk/media/stories/resources/Magic_Numbers_in_the_Dow.pdf


Our conclusion must be that there is no significant difference between the frequencies with which price and time ratios occur in cycles in the Dow Jones Industrial Average, and frequencies which we would expect to occur at random in such a time series.

In our introduction, we noted that empirical evidence from academic studies suggests that not all of technical analysis can be dismissed prima facie. The evidence from this paper suggests that the idea that round fractions and Fibonacci ratios occur in the Dow
can be dismissed.
Click to expand...

motorway
 
Interesting quotes motorway. Thx.

Personally, I only ever use 50% retracements (which I believe, are not even part of the sequence). Just my opinion.

Cheers
 
Yes thanks for everyones contributions and agree about the non fibonacci 50%.Apparently a level that the majority agree on more often.

Every chart tells a story hey.
 
markrmau said:
Just out of interest, I'm wondering what aspects of T/A people think are rubbish?

Topping the list for me is fibonacci numbers. Yes, I know NR who knows more about trading than I will EVER know in my entire lifetime believes in them. But to me it is rubbish. Fibonacci ratios are basically derived from adding the two previous numbers in a sequence. 1,1,2,3,5,8,... To think these really have any magical significance over future price increases/declines is absurd.

It is like the 'more twins are born during a full moon' fallacy. When the midwife sees twins, s/he looks out the window and says 'ah yes, it is a blue moon' or otherwise, doesn't register the lack of a full moon. Only the blue moons are remembered, and so the belief is augmented.

Unfortunately for my rational argument, it doesn't really matter. If you can derive a positive expectancy from believing in fib ratios, who cares?
Click to expand...

I don't think that's really important. The question should be what works for you - ie, what aspects of T/A make you consistent returns. For me its a combination of price, volume and OBV. I don't use any other technical indicators because from years of experience I've learnt that they produce inconsistent signals. But that does not mean they are total crap. Just for me they don't work.
 
Watching a show on SBS tonight about 6th sense and and how peoples emotions direct their thinking, if one was handed a hot drink to hold they made a different decision to some one who was told to hold a cold drink.
4% of Pilots during the wars shot down 40% of the enemy because they seem to be able to predict what the enemies next move would be.
So I guess that is why some people have better trades than others we all know a trade can go up, down or do nothing for awhile the ones who win are the ones who can be the most consistent.
 
i used fib numbers to 'gap' my different values.

ie i want a larger number then 34. so ill experiment with 55.

i want a smaller number then 21 so ill try 13.

does it work? does it make any difference? who knows? is it rational? maybe not - but are markets?

i watched that show too glen. it was very similar in ideas to a book i read this year called "Mean Markets and Lizard Brains" (http://www.dymocks.com.au/ProductDetails/ProductDetail.aspx?R=9780471602453)
 
Glen48 said:
Watching a show on SBS tonight about 6th sense and and how peoples emotions direct their thinking, if one was handed a hot drink to hold they made a different decision to some one who was told to hold a cold drink.
4% of Pilots during the wars shot down 40% of the enemy because they seem to be able to predict what the enemies next move would be.
So I guess that is why some people have better trades than others we all know a trade can go up, down or do nothing for awhile the ones who win are the ones who can be the most consistent.
Click to expand...

do you have a link for this show?
 
a bit of history on the bloke



William Dalrymple and Anita Anand trace the whole history from the Hindu scholars all the way to Fibonacci's popularisation of Indian mathematics, and then the associated revolutions in Medici banking and Renaissance art!
 
Top