|
Links + examples
Hi Neil, trust you won't mind some of my examples as well as links.
http://www.enthios.com/FibonacciPrimer.htm
http://www.ensignsoftware.com/tips/newsletter.htm
http://www.marketscreen.com/help/atoz/default.asp?Num=49
http://www.protradingsystems.com/manual/fibonacci.html
Like most analysis, the application of the fibo tool is somewhat arbitrary, variable in the hands of the user. Using the MetaStock fibo tool, the following are suggestions rather than rules.
Have a basic understanding of Elliott Wave theory in order to count Waves and their Corrections - down in Uptrend, and Retracements - up in Downtrend. Having a basic understanding of Wave formations/patterns greatly assists in applying fibos 'correctly', as well as expecting what the price may do next, when a C/R has completed, a Wave has completed, a new Wave is beginning.
Once the W1/2 have formed, any timeframe, a fibo projection can be applied on the H/L of W1. There's no absolute that the W5 top will occur at 1.618, or compounds of the .618, the theoretical W5HH. Waves top out at 1.382/1.50 levels as well as other fib levels. Also EW AB/H&S formations may occur where the 'true' H is the left Shoulder rather than the second HH.
Often but not always it is the Close that will hit the fibo line while a HH/LL may spike above or below the fibo level. When you've drawn a fibo change to a Line chart and see the new relationship between price and fibo lines, which may also help identify Waves.
Relatively speaking, a fibo projection will be seen to be correct when the C/R Waves hit/conform to fib levels in the 0-100 portion of the projection fib - see Yellow fib on the Daily chart. As can be seen, the fib was applied to the W2L rather than W1 beginning. The top of the Wave is the 150 fib since the 161.8 isn't hit - final White fib, in this case there is an EW AB reversal that results in the higher High, at least that's my interpretation.
One can use 2 methods with C/Rs, projection of W1 or fibo the Wave HL which the price is currently C/R.
Having an idea of the Wave count, one's then able to eyeball the evolving Wave/s and see/recognise the fib lines are correct since the Wave/s/Price is reacting at those fib levels; in doing so, the Wave formations can more easily be counted, and more confidence a trend/Wave change will occur at that fib level. Wallace.
|
Licensed Brokers
Linear Mode
