Are You Trading for Real or Is That Just Wishful Thinking?
The Golden Mean is something you’ve probably encountered if you’ve spent any time around trading. On a price chart, it might have appeared as Fibonacci lines. The Fibonacci sequence, which consists of the numbers 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, and so forth, is a series of numbers in which two successive numbers are added together to provide the third. Some traders define important support and resistance levels using ratios derived from the Fibonacci number series, frequently on the assumption that these estimates are more “natural” because they are based on the Fibonacci sequence.
Fibonacci asserted that seemingly random numbers had recurring patterns. Later Fibonacci adherents expanded his theory to stock and futures trading in an effort to identify patterns in seemingly random price movement. But are the seemingly random price changes “natural and clean” patterns, or is this merely wishful thinking?
The Golden Mean Ratio can be calculated by adding two random values. The outcome is then included in the total. One can find a defined pattern by dividing the former number by the latter after eight reverberations. This pattern is represented mathematically as 0.618 or its reciprocal, 1.618. The most beautiful pieces of art, music, and architecture are said to have this Golden Mean. It is frequently observed in nature in the composition of many of the most exquisite plants, creatures, and seashells. The Golden Mean was important to Greek philosophers and mathematicians because it showed how harmony exists in nature, the arts, and even the human body. It was the picture of equilibrium—the ideal form…the most beautiful sight.
It’s surprising how many consistent patterns there are in the natural world, but social scientists have long recognised that there are very few, if any, consistent patterns in human behaviour. What exactly is trading? It reflects human nature. It was invented by people and is not a natural phenomena. It’s not flawless. It’s not spotless. It is unstable and in turmoil. A good trader must embrace the ambiguity of human nature and take on the challenging task of uncovering consistency where there isn’t much of it.
However, a lot of traders find concepts like the Fibonacci number sequence to be fascinating, almost mystical. However, not every trader finds the Fibonacci number sequence to be beautiful. In fact, the editor of a well-known trading publication pointed out that the pattern may not even be magical. It can appear to operate by pure coincidence (the market is likely to correct somewhere between one-third and two-thirds of the previous trend, which is similar to the commonly used Fibonacci ratios of .382 and .618.) Your position on these subjects could say a lot about your trading style.
The superstitious elements of trading appeal to a lot of traders. They begin looking for techniques based on “rules of nature” to give them a strong but erroneous sense of security since they lack confidence in themselves. In an effort to find certainty and the security it offers, they look for universal and general rules. This is what ideas like the Fibonacci number sequence do. They present potential. One has the luxury of believing in the more powerful, almighty rules of nature rather than in oneself. It’s comparable to accepting fate, luck, or destiny.
One may opt to live a passive existence, putting one’s faith in other forces, and waiting for the proverbial “stars to align” in one’s favour. The most prosperous people in society, however, don’t have time to wait for luck or fate. And it would be advisable to give up any superstitions if you want to become or remain a successful trader. To succeed, you must improve your trade abilities. Build them up to the point where you are impatiently anticipating your alleged “luck” to turn against you in order to show them how resilient you really are.
You’ll find that you can embrace the risk associated in trading the market and rely only on yourself, your abilities, and nothing else when you have strong trading skills and the rock-solid confidence they will provide you.