I have been questioning myself again and again for a long period of time about Fib retracement.
There is no logical explanation of why it works/does not work. The most answer from people is: "because everyone uses them".
How about you? Do you believe in Fib?
If yes, what is the most reason you think it works, besides the common reason above?
If no, what is your reason?
I personally never used Fib as an indicator, because I think these so called golden ratios are just illusions and do not make any sense in term of trading and market sentiment.
For example:
There is no logical explanation of why it works/does not work. The most answer from people is: "because everyone uses them".
How about you? Do you believe in Fib?
If yes, what is the most reason you think it works, besides the common reason above?
If no, what is your reason?
I personally never used Fib as an indicator, because I think these so called golden ratios are just illusions and do not make any sense in term of trading and market sentiment.
For example:
- Elliot Wave may work because it's about psychology facts of how people trade.
- S/R works because it indicates where Supply or Demand has exceed its potential so one tries to get back to the equilibrium point.
- Trend works because once it's formed, it indicates one country advantage over the other, and it will take a lot of efforts/money for a country to reverse that position.
- MA works because... well, as its name: Moving Average. Once a price has broken the MA line - i.e. its equilibrium point/average point/momentum point - that means a new trend has formed and price tends to move away from it.
For Fib, I cant think of any reason. I make up the following theory to explain to myself why people believe in Fib:
- initially back in 1800 or so when people started trading, there was no indicator so the government used Fib to drive the market (i.e. if an item price increases +61% its original price, the Gov knows market is having inflation so they start to act to push the price down?)
- then people/traders started to use Fib
- then these traders became "big boys", over time there are new & more accurate indicatiors but people still use Fib, because these big boys are now familiar with old tools
- hence today where people still use this (illogical-nonsense golden ratio) Fib?
back... and more dangerous.