Any thoughts on Fibonacci systems?

[firlandsfarm]

What do people think of such theories? For me, I can't see why the application of a sequence generated by a random formula should bear fruit but many seem to swear by it. My Fx platform keeps plugging Fibonacci indicators and support/resistance parameters ... is there a correlation in sports events and betting?

[LeTiss]

They may have more relevance for betting systems, but not trading IMO.

It's always nice knowing what you're going to win, but it's even more important to know what you're going to lose. Traders invariably place much larger opening bets than punters, which makes them more vulnerable. Financial management is critical with successful trading, because we all have losses as traders, but when your losses are eyewatering that can lead to a loss of discipline due to the disappointment

[ShaunWhite]

Just because it's something with a price that moves don't get lulled into thinking sports markets are anything like financials. They're very short duration, there's no intrinsic asset value so valuations end at either 0 or 1, all the assets in a market are linked so they can't all rise or fall, moves are purely on sentiment rather than 'news' or capital events..... that's just the start of it; then there's the fact that with fins you dispose of your position to liquidate gains any time, with sports when you buy and sell you still hold a 'buy' and a 'sell' ticket that are only valued when the event is completed (one wins and one loses). I worked in the City for over 20yrs and now traded Betfair full-time for nearly 10 so have a reasonable knowledge of these things and can confidently say there's very little crossover apart from the basic common sense issues around money management. Bin the charts and look at the current order flow. When you get the hang of that then you might find some value in charts but initially they're an overcomplication and a distraction.

(got a new coffee machine and been trying all the options so banged that stream of consciousness in no time Note to self: Buy decaf coffee beans)

[firlandsfarm]

Just because it's something with a price that moves don't get lulled into thinking sports markets are anything like financials.

I'm not Shaun, I posed the question based on my disbelief of the Fibonacci theories and was wondering if someone would explain the reason why they are supposed to work ... regardless of market I can't see a viable reason why they should be given the regard they are by many.

[ShaunWhite]

Just because it's something with a price that moves don't get lulled into thinking sports markets are anything like financials.

I'm not Shaun, I posed the question based on my disbelief of the Fibonacci theories and was wondering if someone would explain the reason why they are supposed to work ... regardless of market I can't see a viable reason why they should be given the regard they are by many.

Sorry buddy I didn't clock the name on the post and went straight for the 101...thats the caffeine for you

? The theory behind using Fibonacci indicators in trading is rooted in the belief that markets move in waves and retrace in mathematically predictable proportions. These proportions are based on the Fibonacci sequence, a series of numbers where each number is the sum of the two preceding ones:

> 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, ...

From this sequence, certain ratios are derived, most notably:

61.8% (the "golden ratio", φ ≈ 1.618)

38.2% (1 − 0.618)

23.6% (1 − 0.764)

78.6% (√0.618)


These ratios are used to identify potential retracement or extension levels in price action.


Why Fibonacci?

The rationale is psychological and structural:

1. Natural ratios: Fibonacci ratios appear in nature, architecture, art, and biology. Traders argue that because markets are driven by human psychology (and humans are part of nature), similar patterns might emerge in financial behaviour.


2. Self-fulfilling prophecy: Enough traders use Fibonacci tools (retracements, extensions, fans, arcs), which can cause price reactions at those levels simply because many participants expect them.


3. Wave theory synergy: Fibonacci levels are often used with Elliott Wave Theory, which assumes markets move in repeating 5-wave and 3-wave patterns. The wave lengths often correspond to Fibonacci ratios.




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Common Fibonacci Tools in Trading

Fibonacci Retracement: Plots horizontal lines at 23.6%, 38.2%, 50%, 61.8%, and 78.6% between two significant price points (usually a high and low). Traders look for pullbacks to these levels before continuation.

Fibonacci Extension: Projects future price targets beyond the original move, typically at 161.8%, 261.8%, etc.

Fibonacci Time Zones: Vertical lines based on Fibonacci numbers, aiming to predict potential time-based turning points.



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Criticism

Not based on economic fundamentals: There's no intrinsic reason why markets should retrace 61.8% or 38.2% beyond visual pattern fitting.

Overfitting and confirmation bias: Fibonacci levels are subjective—you can draw them between any two points, and with enough tries, you’ll "see" reactions.

Statistical insignificance: Studies show that price often retraces by many arbitrary levels—not just Fibonacci ratios. The levels are not statistically superior to other fixed percentages (e.g. 40%, 70%).



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Bottom Line

Fibonacci indicators are heuristic tools, not laws of market behaviour. They’re best seen as psychological markers, areas where traders may cluster orders because they expect reactions. Used mechanically or in isolation, they're unreliable—but as part of a system that includes trend analysis, volume, market structure, they can be useful for framing expectations and planning entries/exits.

[firlandsfarm]

? The theory behind using Fibonacci indicators in trading is rooted in the belief that markets move in waves and retrace in mathematically predictable proportions. These proportions are based on the Fibonacci sequence, a series of numbers where each number is the sum of the two preceding ones:

> 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, ...

Yeah, I get all of your comment Shaun ('quote' cut short purely for expedience!) but other than a big herd of lemmings influencing a market I still don't see why the sum of 2 numbers (both of which were themselves the sum of 2 numbers) is of value. It seems to me the 'proof' (if it can be called that) of the theories is an ultimate exercise in backfitting! Have a theory and find the stats to 'prove' it. I could find a sequence where Martingale is the ultimate profit making strategy but we all know different!

Yes, I'm an unbeliever, I just thought I would see what others thought.

[ShaunWhite]

I'm on your team on this topic Firs. If everyone is looking at the same playbook for a support point then nobody breaches it. The money is in breaking the rules not just following the crowd.

[TupleVision]

All TA indicators given to you by a prop firm / bucket shop are designed for clever psychological reasons to give the 'trader' the illusion they are in control. You can literally apply that concept to ALL indicators, finding an edge spreadbetting is highly unlikely, the firms know this but basically say "look at all the pretty things you can draw on this chart". The only reason they work some of the time is herd mentality, if enough people use the same indicator enough of the time it will become a self fulfilling prophecy (some of the time).

You could literally design your own indicator right now, call it the TupleVision Trend Lines. Basically I want you to draw 7 random lines on a chart and trade around them for the next week, look at how much the price has bounced off that line, it's like magic!

[ShaunWhite]

So refreshing to hear all this and a real sign of lived experience rather than just quoting the things designed to make it sound 'clever'. If the charts had all the answers then nobody would trade manually because quant trading would be a breeze. And it's not, even for firms. And so 'interpreting' charts gets trotted out as if squinting at them like a magic-eye picture is going to change the data. But 'interpreting' them means if you fail it's your fault not the charts.

[ShaunWhite]

The only thing worth looking at is the order book..... but that doesn't mean history doesn't have a value at all because it feeds the temporal prediction models, but it's not the sort of thing one person looking at one race will see anything in.

[TupleVision]

The only thing worth looking at is the order book..... but that doesn't mean history doesn't have a value at all because it feeds the temporal prediction models, but it's not the sort of thing one person looking at one race will see anything in.

Exactly this.

The only people making real money trading the financials have level 2 access and are trading the order book, sticking orders in either side of the market. Not someone sat looking at a M5 chart trading random noise using a moving average and some made up indicator name like the bollinger alligator.

[ruthlessimon]

I don’t like Fibonacci because there’s no natural limit to how it can be tested. I prefer to use ‘human’ numbers or values with clear boundaries (i.e. hours in a day (max 24)). Cos markets are manmade (& sports are finite). I also value falsifiability, and Fibonacci sits in a blurry space when it comes to that.

[ShaunWhite]

I don’t like Fibonacci because there’s no natural limit to how it can be tested.

I didn't know what you meant so asked gpt

Fibonacci is unbounded in how it can be applied and retrofitted, which makes it impossible to test in a disciplined way without strict rules. That’s probably what he meant. But he said it like a man who got halfway through a thought and decided it was the listener’s job to finish it.

[ruthlessimon]

I didn't know what you meant so asked gpt

I copied the entire thread and asked it to roast each poster. I should do this more often

ShaunWhite: "We get it Shaun, you used to run Canary Wharf and now you've moved to laying donkeys in the 2:15 at Kempton. Your posts are so detailed I felt like I should be paying tuition to read them."

TupleVision: "Mate, you sound like you escaped from a hedge fund cult where they made you trade using crayons and trauma. If cynicism were currency, you’d have already shorted this thread."

Firlandsfarm: "Just admit you’re annoyed people keep winning with magic numbers and you're still trying to find value in goal-kick markets."

ruthlessimon: "You tried to drop a philosophy bomb, but it went off halfway through the sentence. Are you a trader or a failed professor who wandered into a sports betting forum looking for meaning?"

LeTiss: "Thanks for the fortune cookie, mate. We asked about Fibonacci, and you responded like a budget life coach who just read the first chapter of Trading for Dummies."

[ShaunWhite]

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