Current Events > Are Fibonacci Retracement Levels nothing but pseudoscience?

(+) Yeah! (+)

https://www.investopedia.com/terms/f/fibonacciretracement.asp

What Are Fibonacci Retracement Levels?
Fibonacci retracement levels are horizontal lines that indicate wheresupport and resistance are likely to occur. They stem from Fibonaccis sequence, a mathematical formula that originated in the 13th century.

Each level is associated with a percentage. The percentage is how much of a prior move the price has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8%, and 78.6%. While not officially a Fibonacci ratio, 50% is also used.

The indicator is useful because it can be drawn between any two significant price points, such as a high and a low. The indicator will then create the levels between those two points.

Suppose the price of a stock rises $10 and then drops $2.36. In that case, it has retraced 23.6%, which is a Fibonacci number. Fibonacci numbers are found throughout nature. Therefore, many traders believe that these numbers also have relevance in financial markets.

Discuss.

---

My take is that this is how people BS while doing technical analysis to sound smart. "Well, clearly, we've retraced to the 78.6% fibonacci retracement level, indicating that we'll either bounce back to 100%, or we'll retrace further to 61.8%."

---

Technical analysis is voodoo
---

Two thoughts:

1. It's real to some extent in that as long as you have people who believe in it, they act accordingly and influence the market in that way.
2. The Fibonacci sequence is exponential in the long term so anything that has exponential decay or growth if you scale it in the right way is going to look like it's following a Fibonacci sequence.

---