I Just Don't Get It!

in LeoFinance2 months ago (edited)

Authored by: @hetty-rowan

I dont get it.png


Really an exception

Sometimes I wonder why the hell I agreed to write up to 3 financial posts a week ... Considering that I'm actually not that financially savvy at all. But it is Sunday again. The day my 3 LBI posts start again. And Sunday is the day I normally write about Technical Indicators. Today will be no exception to this. But what is really an exception is that I would really like to understand today's Technical Indicator… But I JUST DON'T GET IT! I admit, not feeling well doesn't do much good for me in trying to understand ...

The Fibonacci levels

Seriously, since I started to become more interested in the Technical Indicators that could be used in crypto, I have been interested in this indicator. The Fibonacci levels. It should be an incredibly powerful tool. And when I see it in the explanations scattered all over the internet ... then I see it too. But I just CANNOT to manage to draw that thing properly in my cards myself. Let alone get to the point where I can draw an EXTENDED Fibonacci in my cards.

It all sounds so beautiful, and when I see others drawing their Fibonacci levels it also looks very interesting because you can indeed see the support and resistance lines running at exactly the right points. In that regard, I can understand that this CAN be a powerful technical tool.

For those interested like me, below some technical explanation. What are those Fibonacci levels?

Let's start by looking at where the origins of these levels lie. It is one of the most special numbers in existence. We are dealing here with a "golden ratio" that mysteriously seems to occur everywhere in nature.

In the year 1170 a mathematical genius by the name of Leonardo Pisano was born in Italy, and he was nicknamed “Fibonacci”. This young talent brought the mathematical wisdom of the “Book of Abacus” to the West and had discovered a special, and now world-famous, series of numbers:

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, etc.

If you're new to this sequence, it might be a fun exercise to figure out what the next number in this sequence will be before reading on.



Why is it so famous?

Each subsequent number in this “Fibonacci Sequence” is formed by adding the two previous numbers together. So if you did the exercise just now, you should have come up with the number 610 (377 + 233). None of these sounds very special yet, so why has this series become so famous?

The golden ratio

There is something special about this series. If you take every number in this series and divide it by the preceding number, you will always arrive at approximately 1.618:

  • 89/55 ≈ 1.618
  • 144/89 ≈ 1.618
  • 233/144 ≈ 1.618
    Etcetera.

Phi

The number sequence is not entirely precise, but the higher you get in the sequence, the closer you get to 1.618. And this number is also called Phi and is known as "the golden ratio" and some even claim that it is proof that there is a God. These statements aren't just based on a special set of numbers. Phi goes far beyond that.

You can 'see' Phi everywhere!

You come across Phi in art, Phi you come across in humans, your phalanges have Phi as a proportion. You often come across Phi in a sunflower, even in a cauliflower Phi can be found if you look closely. But to really understand what Phi is now, you really end up in mathematics. And that is exactly my problem. I have never been good at math, and never will be good at math. Simple as that!

Back to Fibonacci

So for a complete mathematical explanation of what Phi is, I would have to copy and paste, and that's not my style, so I'm not getting into that. That's not the purpose of this post either, because it was supposed to be about the Fibbonacci levels, and how to use them in crypto trading.

Trading with Fibonacci

Because in the world of trading, the mysterious number is also so common that it has been turned into a trading tool that professional crypto traders worldwide make a lot of profit with. You now understand why I would like to understand this Technical Indicator so much! That's right, who doesn't want to make a profit?

Well now the explanation of how you can use these Fibonacci levels in crypto trading!

The numbers for crypto trading

In crypto trading you're not only looking at Phi itself, but also at its inverse function. Where Phi divides a Fibonacci number by the preceding number, in crypto trading the numbers are also divided by the following numbers or even by two numbers after that or more. Among other things, the following figures come from this:

1.618 = number / previous number
For example: 233/144
0.6180 = number / next number
For example: 144/233
0.3280 = number / second number below
For example: 144/377
0.2360 = number / third number below
For example: 144/610
2.618 = number / second previous number
For example: 377/144



These are all important numbers in the world of crypto trading, because you can use these levels to buy or sell your cryptocurrency for the most profit. To use the Fibonacci levels correct, it is of the utmost importance that you know WHERE to draw them in. And to know where to do that, you first have to get to the point where you can discover “Trends”.

And you then have to know what trend the price is moving in. As soon as you've figured that, you also know how to draw the Fibonacci levels. (Well usually, except for me of course). Sigh.

You use the 'Swing High, and the Swing Low' within a trend to properly map the Fibonacci levels.

In a downward trend, drag the Fibonacci tool from the swing low to the swing high.
With an upward trend, drag the Fibonacci tool from the swing high to the swing low.


For your memory :

  • Swing High Is the highest high in a trend exactly before the point where the course went sharply down
  • Swing Low Is the lowest low in a trend exactly before the point where the course went sharply up.

This is the most I can make of the Fibonacci Levels

I wish I could make more of it, I wish I could draw them in at the way they're supposed the drawn in a chart. But I'm sorry, I have to admit ... I Just Don't Get It.

But one last thing I could find on the internet ... is that many people come up with the predictions that Bitcoin could well go up to 400K USD in this bull market. This seems to stem from the EXTENDED Fibonacci levels.

  • If we hit the Fibonacci level of 5,618, Bitcoin will peak at $76,000.
  • If we reach the Fibonacci level like in 2013, 10,618, Bitcoin will peak at $170,000.
  • If we reach the Fibonacci level like in 2017, 25,618, Bitcoin will peak at over $400,000

And for the observant readers ... Bitcoin has also doubled the Fibonacci levels in every bull run. What that will mean… I didn't get that far, because as I said at the beginning of this post. This is a tool I can't seem to get the hang of. I would love to hear your comments, and I will be forever grateful to the person who can make me understand this technical indicator.

So come on with your comments! Looking forward reading them!


lbi.png

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Just as important to mention. Whether the cryptocurrencies really care so much about the Fibonacci levels, and as it were, continue to move naturally between them ... or whether it is more because many people use these Fibonacci levels as a trading tool, making it a self-fulfilling prophecy, as it were. has become. I will leave that in the middle for a moment. Because here too, of course, a psychological effect plays a role. If enough people use this tool, and thus draw these levels in the maps, everyone will see the same support and resistance lines. With which this can also be MADE to support and resistance through the way people act.

Sort:  

Just draw a random set of squiggles in an upward direction (making sure to make them green) and watch everyone oooh and ahhhh in amazement ;OD

Aaah that's it! I was really thinking that I had to have the exact right points, but now I get it! Just draw random lines and throw it out as MY prediction ... is it important which green colour I use? There are so many!

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The brightest green you can muster! :0D

Ha ha ha ha ha
this is the funniest comment
about something so important.
At least you are trying to stay positive
with a smile.

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You gotta to stay positive and sometimes i think the best way is with a smile!!

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hhahahaha :))) thank you for the laugh

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Yer welcome!

Just think of it as areas to enter if you miss the first push up. It is very hard to predict which ones will be the right levels and it won't always be right. So it depends on which chart you are looking at. For example if you were day trading and there was a gap up, then you would take a Fib between one of the previous day's low to the pre-market high. Then there is a high chance that if there is a pullback and it is indeed going up, that it will retrace 50% or 67%.

The reason why it works is because other people are also eyeing this level so if you draw it incorrectly, then you are screwed. This is why if it loses a certain level, people just cut the trade since it went wrong.

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The reason why it works is because other people are also eyeing this level so if you draw it incorrectly, then you are screwed.

Exactly that ... It's the people who make it work. Because there are so many people using this it becomes a self-fulfilling prophecy.

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So many numbers my head swirls.
I would love to fully understand
the Fibonacci thingie.
I wonder if most people trading know about this.
Gut feeling embedded with emotions rule most
retail investors.
Another way you just stick to your belief system
and hope you land in a green pasture.

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The Fibonacci thingy doesn't seem to be for everyone, but I'm glad I'm not the only one who doesn't get the hang of it ...

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I do like to trade off a fib bounce, especially the 87 and the 61.8. Some people call it financial astrology so ymmv lol.

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Please, make the light shine in my head and explain to me exactly how to use this tool. It seems to work wonders.

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Lol i don't know about wonders but let's take a look at an example:

image.png

See how the HA bar bounces off the 61.8 retracement to go up another 100 pips?

As with other patterns, the criticism is that we se what we want to see. I think fibs are a good part of the arsenal to look at areas of confluence. Whether it is possible to trade solely on fibs, i'm not too sure.

I have watched a number of videos and I believe this is the best one I have found. The fellow is very easy to listen to. Other videos just confused me!

Hope it helps.

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Thanks, will check this out for sure. Now this is what I call, helpful!

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These Fibonacci levels are insane and I really don't know the metrics that decides it, but then we can't really predict crypto it does unpredictable things.

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To a certain level I agree, yes. Still I think that those TA's are very useful to know how to use them because it can help.

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Yeah it's essential to know how to use, These things can be really complicating. I was totally awed reading how it works here

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I loved your article colleague, I like the way you write 👌. I didn't know the origin of Fibonacci, although I remember in school my math teacher told me about Pi and the golden ratio, only at that time I was a kid and I wasn't interested hahaha.

And yes, Fibonacci levels are extremely useful for trading the markets. It practically gives you the key points where the price could retrace in a trend correction, it is a beautiful tool. In fact just 1 hour ago I uploaded an analysis of Uniswap where I marked the possible correction points with a Fibonacci😂😂.

Thanks for this article, I will be attentive to your next posts. Best regards! 👋

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Thank you for your compliments!

Actually I knew about the golden ratio because of painting. But I never paid enough attention to maths to know it was there too. As I never was good at mathematics it just wasn't going to be my thing ...

I will check out your post to see another perfectly drawn Fibonacci. Lol ... just to remember that it is a powerful tool. And again think, oh if I only could get the hang of it.

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You do like to go all in with math on Sunday, is this some kind penance for past mathematical sins? :)))

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Lol ... all or nothing

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I Just Don't Get It!

This is so relatable @hetty-rowan. I feel like I am Jon Snow. :(

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Glad I'm not the only one!

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Fibonacci levels are a self-fulfilling prophecy.

With a ton of traders keeping an eye on these levels, they work because enough people think they work.

Wild huh.

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Yup ... it's amazing. But still I think it's not THE best tool out there. And that's my luck. When I don't get to understand this one, there are enough other tools to make use of.

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Fibonacci seems like a tool almost every trader uses. I might have come across the name once or twice but didn't quite know it works.

Great reading it here and get a clue of how it actually works. Thanks for sharing

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Nah not sure if almost every trader uses this tool. Many do, but I know at least one, who hates it. And still he usually is 'spot-on' with price targets.

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 2 months ago Reveal Comment

Well, for the ones who plan to start with trading I would recommend it.

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