Fibonacci Sequence pt.3

Does Fibonacci Influence How People Speculate?

If we look for the presence of the Fibonnaci ratios over short periods, then it is less likely that we are looking at natural phenomena. It is more likely that we are seeing traders’ responses to their technical tools. As a result, we are looking for signs that the Fibonnaci ratios are being used as lines of support/resistance in the graph. Below is a graph of EURGBP, 15mins:

 Fibonnaci 15mins

We can see in the graph above that there does appear to be some form of correlation between the ratios and the movements in the graph. That being said, this graph raises the question regarding how useful are these ratios in trading. Below are a few comments in response:

1. Although there is some semblence of correlation between the lines and the price in this example, this is not always the case.

2. Due to the fact that there are many lines that the price can interact with, it is difficult to ascertain which ones traders will use.

3. We can also see that the price does not interact with the lines exactly and so it would be difficult to know when to enter or exit a trade. 

The above facts raise questions about the value of the Fibonacci ratios to a profitable trading model.