Monthly Archives: February 2010

A Great Example of Trading “Psychology”

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You’ve probably spent some time on various trading forums.  Have you ever noticed that:

– Threads with vague “methods” go on for dozens of pages. Look at all the crap on the forums where people are vague but don’t give enough specifics to actually have a complete system.  I don’t have to name names because you’ve seen what I’m talking about.  Or the (other) fib threads with all the after-the-fact charts posted. “OMG I HAVE TO STUDY THE MYSTICAL NATURE FIBONACCI SEASHELL SEQUENCE OF LIFE!!! SEASHELLS ARE DIRECTLY APPLICABLE TO TRADING!!!”

– This site gave everything up front with no BS, no guru story, no nothing.  Well, the only thing I left open for interpretation was how many lots to buy at each position. But that’s gonna depend on you and also on how wide the gap is from the 0 line to the 100 line, because it’s going to vary based on the size of the trend. Your position size for a span of 10 points might be different from on a span of 50 points because the total dollar risk would be different, then.

Note – I’m not responsible for any losses. But if price retraces at fib numbers, like people claim, this method should make a lot of money.

Begin Here

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“Fibonacci gurus” will show you nice charts after the fact where price happened to bounce off a Fibonacci level and say “see?  Fibonacci numbers work for trading.”

Nonsense.

They fail to acknowledge all the times they don’t work.

If Fibonacci numbers are magical, then all you have to do is buy every time price retraces to one, and buy more when it retraces to the next, and eventually when it goes back up you’ll make money.

Do not trade with money you can’t afford to lose.  Just because I am profitable doesn’t mean you will be.

Fibs are magical because they’re based on some random calculation that has nothing to do with trading, that someone applied to trading by thinking that ZOMG TEH NATURE OF TEH UNIVERSE IS CONTAINED WITHIN!!!!

Fibs are the same as this:

Increase by 3. 3, 6, 9, 12, etc. Now divide each number by its subsequent number. You now have .5, .66, .75. Now, let’s apply these numbers that I randomly got to trading because THEY ARE MAGICAL!!!!

Draw lines at 50%, 66%, and 75%. TRADING MAGIC POWERZZZZZ!!!!!

Look, if they work consistently, then do whatever. I don’t care.

All I’m saying is I just gave a better method for fibs than any that anyone has been able to quantify in the entire history of trading.

EVERY fib explanation I’ve heard basically boils down to:

– sometimes price reverses at the lines, although there’s no way to predict which line, if any it will reverse at, or how high it will go once it does reverse.

It was then accompanied by some awesome after the fact charts where it worked perfectly.

Sounds pretty vague to me.

Sometimes price will also reverse at my magic .5, .66, .75 numbers. HOLY COW THEY ARE MAGIC!!!! But sometimes they also won’t reverse at my numbers because HOLY COW PRICE IS RANDOM.

If price consistently reverses at fib lines more frequently than at any other place as all the fib gurus seem to claim, then the method in this thread will make you a profitable trader (especially if you play both sides at the same time).