In currency dealings is important to know which currency to buy and which to sell. But more importantly - when transact with the selected asset. One of the best approaches to addressing this issue - the ability to accurately measure the signals of price and time.
Trading strategies, Fischer
In this sense, the achievements of Robert Fisher [1] provide a powerful new arsenal of trading strategies and software for the Fibonacci - how to identify trends and reversal patterns. This allows traders to achieve a high percentage of winning trades.
Currently, there are many trading strategies trading on financial markets by Fibonacci. Some of them have been considered in the pages of "BC" [2, 3]. In technical analysis are widely used and the number of Fibonacci coefficients [1, 4], which is considered by many mathematicians who build our universe. For example, the size of the universe based on the ratio, the proportions of human body parts is usually the golden section. The Fibonacci sequence consists of numbers 1, 1, 2, 3, 5, 8, 13, 21, 34, etc., where the sum of two adjacent numbers gives a new sequence, followed by the number of them the same sequence. Fibonacci coefficients are obtained by dividing the number of its sequence. Thus, the limit of the ratio of each number to the next is equal to 0.618, and the previous - 1.618; limit of the ratio of each number to the next one after him is 0.382, and vice versa - 2.618. These numbers, which also carry a profound meaning, and determine the length of the correction.
Without going into details of the possible application of the Fibonacci series and its trading strategy, including the well-known golden section, you can simply postulate that the laws of our universe, the structure of many objects, animate and inanimate nature, beginning and ending of microworlds structure and dynamics of the universe are its application in financial markets. And although such a statement from a mathematical point of view does not hold, we can empirically observe that exchange rate dynamics of any liquid currency in the timeline is in the form of loops, waves. They are often subject to a number of numeric Fibonacci (think of Elliott wave theory [4]).
Even if a successful trader says he does not believe in technical analysis by the method of the Italian mathematician, he immediately adds that it is necessary to investigate the price chart in its key points to be aware of the driving forces of "techies on Fibonacci." Perhaps that is why significant points of the price chart (whether intersection with Fib price channel, an ellipse or a fib-fib-helix, as well as figures, combined with price and time targets Fibonacci [1, 4]) generally have a greater meaning.
In trading, as you know, even a slight advantage in understanding the market and its driving forces can enrich the trader. Therefore, to market analysis and trading strategy of Fibonacci should be taken seriously, even if you're not a supporter of trade in its proportions. For example, widespread in recent years, a jump-diffusion model of pricing in financial markets [5] essentially reflects one aspect of the market in application of Fibonacci numbers. According to him, any strong price movement in the forex market is divided into a series of damped oscillations, often in proportions or ratios of Fibonacci. Thus, the strong market FOREX (when the exchange rate varies with speed of more than 40 pips per minute), the length correction, as a rule, is 0.382 of the length of the course traversed. In FOREX, medium strength (when the exchange rate varies in the range of speeds from 20 to 40 pips per minute), the length correction is usually equal to 0.5 of the length of the courses. This is the most common length of the correction on the market in question. The maximum length of the correction is 0.618, although sometimes it can reach 0.75. This level - the most interesting in terms of entering the market with the simultaneous installation of stop-loss. Do this: say, a bearish trend is rolled back up to the level of 0.618. A trader must understand that from this level is well open a short position, but a safety net against possible losses, he should put the purchase order (stoploss) at a rate of 10-15 pips above this level (taking into account the spread, of course). The fact is that if the rollback exceed the level of 0.618, it is often associated not with the correction, and with a broken trend. On the bullish trend is the same thing, only in reverse.
It is becoming clear that the "fundamental" explanations of price and time targets in the evolution of market corrections, extensions of time and Fibonacci analysis itself is very important. But of greater interest is the practical method of Fisher, which allows trade profitably on different investment horizons - as a positional player, and within-day scalper.
Trading strategies, Fischer
To demonstrate how Fisher uses the analytical tools of the Fibonacci sequence and NGOs forex trading system, we analyze the FOREX market daily dynamics of the USD / JPY (Fig. 1).
Concentrate on the temporal order of Fibonacci, assuming that the reader knows how to price targets set independently at least Fibo Fibo correction or extension [4, 5].
Spot price graph Japanese yen was not chosen by chance. Rate of this currency, as has been repeatedly observed [5], expresses the sentiments of the majority of participants in its market. This can result in a significant discrepancy with the market price of the currency of its true cost, calculated on the basis of the fundamental driving forces.
As a rule, the price of currency fluctuates above or below its true value, reflecting the non-fundamental factors and introducing pricing, type of personality psychology and the crowd. This "emotional" component of the price of Fisher and calls human behavior. It is clear that financial instruments such as USD / JPY, which have high liquidity and trading large volumes, will behave as a good indicator forex world concentration of human emotion.
Thus, in Figure 1 is a graph of USD / JPY Daily from 12 August to end October 2002 on it, we begin to count pobarno Fibonacci numbers 5, 8, 13, 21 and 34 only on the relevant extrema confirmed as forex technical indicators, and unit of economic news.
For example, on 14 August 2002 at the Japanese yen market on a daily sweep was formed at least. This followed a meeting of the Committee of the U.S. Federal Reserve, where the refinancing rate has remained the same, but the leadership has taken the position easing monetary policy. At the same FOMC noted that the risk of worsening economic situation in the country creates a situation in financial markets, in particular, the corporate scandals. Naturally, in a statement the Fed noted that one should expect lower interest rates in the future if the American economy will fall. Thus the Federal Reserve once again showed that it was not just closely monitoring the situation in the economy, but always ready to support it, and calmly and without panic. It is interesting that an hour before the announcement of the decision on rates Bush made statements about his complete confidence in the strength of the national economy. He noted that the foundation of the American economy are strong, and pledged that his administration will continue to address violations by corporations. In these policy statements was interesting one fact - Bush acknowledged that it is necessary as soon as possible to come to a balanced budget, the deficit of which were defense spending. The call to reduce public expenditure is reasonable, considering the difficulties of the economy. The question is, what actually will be done to restore the budget surplus. As expected, the dollar's decline was not continuous. In the U.S. session was followed by the growth of the U.S. stock market - an indicator of expectations of traders that the Fed will not let the economy slide into a new recession. This development was in favor of the dollar - it has grown considerably. Although the probability of recession is still high, however, on the 14/08/02 market was dominated by the bulls. Optimism also increased after a large part of the leadership of the largest U.S. corporations under oath pledged their financial statements.
When counting the bars on the specified day, we see that after 8 bars, 8/26/02, was formed by a maximum, after which the rate of USD / JPY down again corrected within 5 bars. Fischer believes that, in calculating the number of days from the Fibonacci sequence should also take into account weekends. However, the practice of intraday trading points to the fact that it is easier to count the number of bars. Still counts the number of bars from the previous peaks or troughs rarely fall exactly on the same day, when we test the price reversal.
In reality, we find a band of time, which are placed a few bars. Fisher found that to be accepted and legally confirm the maximum or minimum price fluctuation, this band should not be longer than four bars.
In other words, a temporary purpose, calculated from a minimum of 13 bars can be achieved in two bars sooner or later, two bars at the time target, calculated from the maximum of only 8 bars before.
As seen in Figure 1, the reversal rate chart USD / JPY, which occurred after 18/10/02, the fairly reliably interpret the proposed method, first, by a kind of cluster signal (overlapping results from the summation of various extremes).
To be sure, Fisher's achievement of course objectives is a dominant feature in comparison with the temporal order. That is, if the market reaches the price target ahead of time, we are satisfied with the results of their predictions. If previously obtained a temporary purpose, but the market is still rather weak and has not reached the exchange rate target, in each case, the trader must decide for himself whether to go with the market according to the established rule of Fibonacci or wait in case the price target is reached .
Fib-ellipses
Operate profitably only by the type discussed above configurations peak or trough is sometimes difficult. Especially in a market with a lot of false breakouts, as discussed in the trading system the trader priority belongs to price analysis. Conditions change, if included in the analysis of the market element of time, the filter noise from the movement of the market and provides investment strategies more stability. And then there are PHI-ellipses (ellipses-Fib) (Fig. 2, 3) [1].
Working with them is more difficult than in the previous case. The basic structure of PHI-ellipse is very simple, but since the price patterns are often transformed in time, then gradually the final form of the ellipse can also change (see the deformation of the ellipses of Fig. 2 to Fig. 3).
PHI-ellipses represent the counter-trend of the market. In other words, we are seeing is a movement within the PHI-ellipse, and thus enter the market (or exit from it), if at the end of the exchange rate movement breaks the line of the ellipse. As seen in Figure 2, we construct a center of ellipses have a peak on the market: USD / JPY Daily 23.08.02 city, and "pulled" ellipse of 0.382 at the previous and subsequent lows, that the proportions of the ellipse passing through the investigated 1.000 peak formed by exactly a month later. We see that the price for the next five (Incidentally, the number of the Fibonacci sequence) bars could not break through the line of the ellipse, all the while sliding along it down. It was only the sixth bar, there was a powerful probe of the line rate up, thus confirming the continuation of the bullish trend.
A similar situation is presented and in Figure 3. Here we have a similar structure of the ellipse formed by 1,382 to pull on the peak of 10/18/02 was seen that in this case, the price could not be in the same breath to overcome the resistance line, which was built by PHI-ellipse, after which the rate began to fall significantly.
Trading strategies, Fischer
From the presented last two figures it is clear that on the price chart you can put a lot of PHI-ellipses with different parameters. However, the construction of a PHI-ellipse - this is art. Requires skill, experience, patience and faith in the presented technique to effectively use the PHI-ellipses as Fibonacci tools for technical analysis of currency market [1].
The biggest challenge when dealing with complex concepts of Fibonacci - is that every trading tool should be designed with great precision. This is especially true construction of complex shapes such as ellipses or Fib-Fib-helices. It simply requires the proper software.
In conclusion it should say: evolution of the market forecasts, the results of Fisher have many inherent limitations, a hundred should be considered when creating a trading system. And there's no guarantee (and mathematical reasoning) that worked in the past, the model will be effective in the future in a particular market position. Moreover, experience shows that the historical retrospective application method and the Fisher real trading results often vary widely. And there are a few reasons. Chief among them are rooted in the psychology of a trader and an inability to rationally manage risk [1]. But this topic for a separate publication.