If all of these charts look confusing do not worry, this is easier than using moving averages once you start looking at the charts from the correct perspective.
This may be a
whole lot different than what you believe about how the market moves, but I will explain what
I believe to be true about the market. I do respect any opinion about how the market moves, but this is
my take.
Concepts:
--People subconsciously follow the golden ratio:
When the market is moving there are two emotional traits fighting. Fear and greed drive the market up and down and ultimately dictate highs and lows. When greed runs out and fear takes over we get a swing in either direction. This applies to any situation the market faces. People that believe fundamentals are at the core of trading are 100% correct, but what is often overlooked is that
price has to stop somewhere. Price eventually stops at
golden ratio points. Recently this was seen when the earthquake in japan caused chaos not only in the streets, but in the FX market as well. The market had to stop somewhere, and even though the event could not be predicted, the market could have been. (charts below...also the first chart is the same ratio at play that is currently being used in the EU chart on the page...notice it stops at a .618 level)
Same pattern as current EU (stops at .618) This is right as the "chaos" starts.
From another swing low.
And another.
Again.(different high from a different cycle)
Tracking Down:
Move down stops spot on.
A not so random low.
These are great examples of the market having to stop "somewhere". If a body of water overflows eventually the water disperses over a large enough area and travels no further. That is the best way I can describe this phenomenon.
--The Past tells the Future:
All of the points used to predict a future point have already occurred. All there is left to do is connect those pieces and find the "missing segment" to make a complete cycle which should = 1 or "whole". This is not to say that all TPs are 1 levels. In fact, many are not. But as we shrink and expand our fib to fit the correct points in the past the golden ratio of .618 shrinks and expands to yield the same patterns over and over again.
--Logic Game:
In logic games you are given a set of rules and then asked to answer questions about possible outcomes based on the rules given. The golden ratio gives us perfect trades by setting a key rule:
-Once points are found price will reach a new high or new low (depending on direction of trade) before breaking the point we are projecting price from.
The above rule is key to the trades. If we assume that rule to always be true, then you can place a stoploss under the point you are projecting from and take profit at the projected new high or low. This allows you to take the maximum pips out of the market, unlike many other strategies that let many pips go before getting out of a trade or leave you out of the trade as the market continues in what would have been your favor.
This is why I choose to trade using only the golden ratio.
Any Questions Can be Emailed to:
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