The Fibonacci and Golden ratio myth

[Garpal Gumnut]

1. First, obviously, even if the finger thing above was right, it's still wrong. See, from the proportions you're giving: 3/2 = 1.5. 5/3 = 1.66. 8/5 = 1.6.

None of them are the golden ratio, and they're ALL DIFFERENT.

2. Second, honestly, people are different. We're not all built to the same spec. Here, have a squiz: http://images.google.com.au/images?hl=en&q=hand x-ray&um=1&ie=UTF-8&sa=N&tab=wi&safe=active

Get out your ruler, bring up some images, and see if the 2, 3, 5, 8 ratio holds.

It doesn't.

Here's a nice one from the first page of results (hope this isn't too big, here's the link if I need to delete it: http://www.newswise.com/images/uploads/2008/03/28/fullsize/hand_xray.jpg):



By my ruler and screeen resolution, the index finger digit proprtions are: 1.6 : 2.2 : 3.7 : 6.9. Which equates to proportions:
1.375
1.687
1.865

See any golden ratios in there?

If you think you hold a mystical key to the universe, you're probably wrong. It's not even hard to check, if you could be bothered. :

.375 , .687 and .865 are quite signficant numbers in Fibonnaci theory.

You are a human, or near enough, so don't waste money on dna or checkups.

gg.

 

[SmellyTerror]

You are a human, or near enough, so don't waste money on dna or checkups.

I'm going to need that on a certificate. Sometimes my wife expresses doubts.

 

[Garpal Gumnut]

I'm going to need that on a certificate. Sometimes my wife expresses doubts.

lol

gg

 

[Sir Osisofliver]

1. First, obviously, even if the finger thing above was right, it's still wrong. See, from the proportions you're giving: 3/2 = 1.5. 5/3 = 1.66. 8/5 = 1.6.

None of them are the golden ratio, and they're ALL DIFFERENT.

2. Second, honestly, people are different. We're not all built to the same spec. Here, have a squiz: http://images.google.com.au/images?hl=en&q=hand x-ray&um=1&ie=UTF-8&sa=N&tab=wi&safe=active

Get out your ruler, bring up some images, and see if the 2, 3, 5, 8 ratio holds.

It doesn't.

Here's a nice one from the first page of results (hope this isn't too big, here's the link if I need to delete it: http://www.newswise.com/images/uploads/2008/03/28/fullsize/hand_xray.jpg):

By my ruler and screeen resolution, the index finger digit proprtions are: 1.6 : 2.2 : 3.7 : 6.9. Which equates to proportions:
1.375
1.687
1.865

See any golden ratios in there?

If you think you hold a mystical key to the universe, you're probably wrong. It's not even hard to check, if you could be bothered. :

Hi Smelly,

I just wanted to make a quick post. In doing so I just wanted to help open you up to a possibility you may not have considered.

The market is an expression of the aggregate viewpoint of all of it's participants.

What you say above is true, individuals have some level of variation away from these ratio's. How could they not? If they didn't we would all look alike. When you take a number of individuals however and aggregate the results... You get very very close to fib ratio's. The more people you include...the closer you get.

When we deal with the market, we are dealing with aggregates - not individuals.

Cheers

SIR O

 

[SmellyTerror]

A good point, and well made.

But we're looking at figner bones because they come kinda close to Fib numbers. What if we looked at ribs, or ear-lobes, or scrotum wrinkles? Look long enough and you'll find something close to Fib ratios. I could make up a completely bogus ratio and look long enough to find examples of it in nature. And in trading.

That's what I mean when I agree it's a myth.

What particularly gets my goat, I think, is the precision of the numbers. In science, if you go to a certain number of significant figures, you are saying something about how precise your measurement or calculation is: 6.00 is a lot different to just plain ol' 6. so when I see 1.61804 buzzing about, I can't help but sneer. You've gone 6 significant figures. You don't get to use the word "about" any more. :

Again, I agree that there is a certain amount of movement is a price that will make people stand back a moment to reconsider, and that might make a turn. But Fib ratios' relationship to that rough area is purely coincidental IMO. There's nothing magic or especially significant about the numbers themselves, and a lot of the guff (shells, finger bones, proportion of happy bible stories to vengeful bibles stories) around it is either irellevant or wrong.

It's not the practice of Fib, as I've seen it done, that's a myth, because a general desciptor of crowd behaviour at particular ranges is useful ("retracement" is a useful concept, and an idea like "about that much movement means this is likely" is easier to track and discuss with numbers appended).

Rather, it's the stuff surrounding these particular numbers that is a myth. They're not magic. The universe doesn't particulary care about them. You could just as easily use a lot of different ratios.

Look long enough and you'll find any number at all.

 

[Sir Osisofliver]

A good point, and well made.

But we're looking at finger bones because they come kinda close to Fib numbers. What if we looked at ribs, or ear-lobes, or scrotum wrinkles? Look long enough and you'll find something close to Fib ratios. I could make up a completely bogus ratio and look long enough to find examples of it in nature. And in trading.

Yes you could. Anyone can make a number series and then find examples to justify them. The question of the relevance of these ratio's (and their apllicability to trading) therefore is a question of how frequently they appear. If they appear frequently enough to be beyond co-incidence then they are relevant, and the examples of finger bones, facial features, shell or scrotum sack wrinkles is merely an expression of how frequently they are found in nature. (Or how frequently they are found in share charts). Have you ever wondered however why they are found so frequently?

That's what I mean when I agree it's a myth.

What particularly gets my goat, I think, is the precision of the numbers. In science, if you go to a certain number of significant figures, you are saying something about how precise your measurement or calculation is: 6.00 is a lot different to just plain ol' 6. so when I see 1.61804 buzzing about, I can't help but sneer. You've gone 6 significant figures. You don't get to use the word "about" any more. :

Are you aware that like Pi - the numbers that appear in Fib ratio's are irrational numbers? The numbers cannot be expressed as a fraction, they do not terminate, and they have no repeating series. EG 2.6666666666. So when we say 1.61804 it's just like saying Pi is 3.14159 - when the number continues indefinately.

Why is this important?

It's important because irrational number series are an expression of an emergent chaotic system. A choatic system (such as evolution for example) should produce chaotic results, yet Fib ratio's appear with significant frequency. (even allowing for individual variation). So if you think that the share market is a system based on chaos... you need mathmatical tools based in chaotic systems analysis to read the emergent patterns.

But chaotic systems analysis is by it's very nature chaotic. Here's a simple example. What's the probability that a tossed coin will land head or tails? You only have two choices that are equally probable so the answer is 50%. Now tell me what order those heads or tails will arrive in. I've gone from asking you a simple probability question to one involving chaos modelling. What tools can you use to try and answer that question?

This is why Technical Analysts use a buffer around the Fib Ratio's. It's an attempt to quantify in a simple and fast method what is very difficult if not impossible to quantify with our current mathmatical tools. By doing this however we increase the amount of "co-incidence" that occurs and further steep the tool in the realm of magic and soothsaying.

Again, I agree that there is a certain amount of movement is a price that will make people stand back a moment to reconsider, and that might make a turn. But Fib ratios' relationship to that rough area is purely coincidental IMO. There's nothing magic or especially significant about the numbers themselves, and a lot of the guff (shells, finger bones, proportion of happy bible stories to vengeful bibles stories) around it is either irellevant or wrong.

I'm not trying to convince you that Fib ratios are the be all and end all of technical indicators. To be a successful trader you have to use what works for you and if you think that Fib has no value or is based purely upon co-incidence... don't use it. I disagree however that there is nothing significant about the numbers.

It's not the practice of Fib, as I've seen it done, that's a myth, because a general desciptor of crowd behaviour at particular ranges is useful ("retracement" is a useful concept, and an idea like "about that much movement means this is likely" is easier to track and discuss with numbers appended).

Rather, it's the stuff surrounding these particular numbers that is a myth. They're not magic. The universe doesn't particulary care about them. You could just as easily use a lot of different ratios.

Look long enough and you'll find any number at all.

I don't believe in magic. I don't think the universe is capable of having emotions, but that ratio is emergent in chaotic systems for a reason. It's just not a well understood reason because we don't understand chaotic systems all that well.

Cheers

Sir O