On Fibonacci indicators or one more myth that has to go

You can quote me on the following.

1. There is nothing more offensive, and pathetic at the same time, than a grown-up man masturbating himself with the Fibonacci indicators.

2. I believe that it can be proven that there exists a strong correlation between imbecilism, the use of Fibonacci indicators, and erectile dysfunction.

3. The only way you can reliably use Fibonacci indicators is to estimate the number of intelligent traders, that is, the traders that have no other use for these indicators. This number is 10% in relative terms, and 10, predictably enough, is not a Fibonacci number. Neither is the percentage symbol!

4. Some people have written books about the sole use of Fibonacci indicators. These people are called idiots.

What's the big deal about this thing that it has achieved such a cult status?

It's just another indicator, for God's sakes! You can't trade with just one indicator, no matter how many lines it produces when you fully unfurle it. An intelligent way to use indicators is to use a few different indicators, so that you can get a better picture, a picture based on more than one algorithm, meaning more than one approach or perspective.

The Fibonacci indicators are just a bunch of lines and applying these lines takes a good deal of discretion, probably more than is the case with most other indicators. The geniuses who use these indicators decided that the best way to resolve the arbitrariness of applying the indicators is by using multiple time frames.

They call it confluence. They are wrong.

I known Confluence. Confluence is a nice, bright, pretty lady. That is not Confluence at all.

That is Clusterfuck, a dumb, angry, high school drop-out.

Predictably enough, he likes to hang out on that forum run by a guy who blew two of his day trading accounts and pretends to know something about trading. Yes, you have been warned: that's where this guy hangs out.

There is no science in the Fibonacci indicators, despite insinuations of their promoters, and most people who rely on them very rarely use them in a mechanical manner, which shows that the indicators lack the rigour that science loves so much.

Dont' get me wrong: I am not saying that these indicators cannot be useful, but merely that they are not necessarily more useful than other indicators that may be eclipsed by the Fibonacci indicators for the latter seem to enjoy a privileged status at times, the status that they have hardly earned. There are many trading indicators out there that may also deserve our attention, so it's the highest time to end the Fibonacci cult.

That's one of the tasks I see for the forum that was launched a few weeks ago.

Namely, to debunk things that are not what they may appear to be due to the hype that surrounds them, and to instill critical thinking in general.

It's very needed, and not only if you are a trader, though being a retail trader does require you to hone your critical thinking skills quite well, if you want to survive in the sea of marketing hype and outright BS that we all are forced to swim in, with some, unfortunetely, having drowned already.

And so that you don't leave this page with a wrong impression: I love Fibonacci numbers, the Fibonacci sequence, the Golden ratio, and all that Fibonacci jazz, but that does not mean that I worship them and use them for any occasion. They are an example of neat mathematics, of highly recreational value, and may have uses here and there, but there is more to trading than just that and even that should only be used in moderation. In fact, virtually anything should probably be used only in moderation. Even things that are absolutely necessary for normal functioning, such as food, for instance.

I play with these mathematical structures all the time, I have developed original Fibonacci-derived mathematics for my sheer amusement, and it is probably safe to say that I know more about them than 99% of traders. From my perspective, not only that of a trader but a mathematical physicist as well, they are neat structures that may be even underutilized if their full glory is taken into account, but at the same time have been badly overused (if not abused) by many who have only a limited grasp of them and keep flogging that little they know to death. Enough already!

Posted on January 5th, 2015.