carolyn-borodenCarolyn Boroden, known to many as the “Fibonacci Queen”, started her trading career on the floors of the Chicago Mercantile Exchange back in 1978. These days Carolyn doesn’t trade so much herself but instead specializes in Fibonacci time and price analysis to help give traders an edge in the commodity and stock markets.

In this show Carolyn helps us dive deep into Fibonacci analysis and shares with us:

  • The unique Fibonacci approach her mentor taught
  • How she uses symmetry in time to pick better trades
  • Where newbies should to start out with Fibonacci
  • A trading strategy that works well with Fibonacci

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12: Fibonacci Queen (Carolyn Boroden) on the Secrets of Fibonacci Time Analysis
00:00:00 00:00:00

Recommended book

Dynamic Trading: Dynamic Concepts in Time, Price & Pattern Analysis With Practical Strategies for Traders & Investors by Robert Miner

Trading style

Fibonacci specialist

Interview links

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Transcript highlights

Cam Hawkins:

Tell us more about you personally, and what you do in the Fibonacci space?

Carolyn Boroden:

It all started quite a few years ago. It was after the crash of ’87 and that’s where I ended up meeting my mentor Robert Miner and he was speaking on Fibonacci, not only on the price axis of the market but also on the time axis of the market. And that’s when it felt like it was that proverbial light bulb that went off in the top of my head and it just fascinated me and I had to know more. From that day on I started studying, until I got to a point where people just started offering me money for the advice that I was getting off of this work. What I really do with it, I do apply the ratio’s derived from the Fibonacci number series on both the time and the price axis of the market. So, a lot of people are familiar with using it on the price axis, but not necessarily the time axis. The time axis really gives you a real edge that a lot of others will never see unless you do this type of work.

What’s important is that it works more often than not, rather than why does it work. I think it’s more important for most traders that it does work rather than why.

Cam Hawkins:

Can you the listeners who are unfamiliar with Fibonacci a quick overview of what it’s all about?

Carolyn Boroden: 

There’s a basic number series that was studied by that famous Italian mathematician Fibonacci and within the number series, what we find as you go out to infinity is that the numbers are related to each other with the golden ratio; or 0.618. So the actual number series is, 1, 2, 3, 5, 8, 13, 21. You basically get the next number in the series by adding the prior 2 numbers. Like 5+8 being 13 and so on out to infinity. And what they found was, in between these numbers, the ratio of 0.618 would come up as a standard. Now, not only do you find it in the numbers series you also find it in nature. So, a lot of times people that work with Fibonacci will have a logo that includes something like a Nautilus shell that shows the spiral with the 1618 or the golden rectangle. Or, for example, the ammonite fossil or even the spirals in the galaxies. They all have Fibonacci in them. So it shows up in nature; also flowers that’s where it does show up quite a bit in flowers. That’s where you can find it in nature and outside of the market.

Cam Hawkins:

Go back in time now Carolyn and tell us what first attracted you to trading and talk us through that very first trade you took?

Carolyn Boroden: 

Well, I did start on the trading floors in Chicago and I never planned on getting involved in this business. It’s kind of like I ran away from home and got a job on Wall Street. I’m not kidding. There is an article I wrote about that whole experience. I never planned on being involved in the markets. When I moved to Chicago when I was 20 I worked on the trading floor and that’s where I got introduced to basic technical analysis. After that and when I met my mentor and learned a bit about Fibonacci I basically threw everything else that I ever used out the window and just focused on that. I believe some of my early trades working on a trade desk taking orders upstairs. I remember opening an account and just doing some basic trades using pull backs and that type of thing, to get involved in the market. But, of course, as a beginner I made some big mistakes after having some nice wins I remember giving it all back in one trade because I forgot to put a stop in [Laughs].

Cam Hawkins:

Carolyn, let’s go back to that time in your trading career where you discovered Fibonacci. Why did it interest you? Who was your mentor? How did you become an expert? We want to hear that story.

 

Carolyn Boroden:

What happened was, I heard about Bob Miner a while back, but I remember that there was a seminar that was going on in Chicago, and I had a friend of mine recommend I go to this seminar because there was going to be a lot of people and a lot of good information that was going to be shared. I finally let him talk me into in and I did go to it. And the most powerful presentation was by Robert Miner. I guess, the way that it was so predictive when he showed the example of how to use Fibonacci on the time axis of the market. That’s what really got me. I mean I can still do some setups that just include price alone but when he showed how you can apply it to the time axis of the market (and I tested it on paper charts by hand, and it worked more often than not) that had me hooked right there.

Cam Hawkins:

Can you talk us through that specific time when you mastered Fibonacci and everything fell into place. Your big “ah-ha” moment. That point in time you started to really “get it” – What did you do differently? Who did you learn from? That sort of story…

Carolyn Boroden:

This was another kind of synchronistic event in my life because I use to work on the trading floor and I lost a really cushy job after the crash of ’87. So next thing you know, I’m upstairs working on an order desk and I decided to become a broker. Well, as I’m becoming a broker and I’m still studying what I was learning from Robert Miner I started sharing it with clients. And after that people just literally said that they would pay me for that work. Could I do more of that work for them? Because, for example, I gave this one guy who was trading crude oil, I gave him some time cycles for a change in trend in the market at that time and he came back to me later and said “Do you remember the crude call you gave me?” and I said “No”. He says “Well, I do and it made me a lot of money. So I would like to work with you.” That type of thing started to happen. Then I had somebody else say the same thing so next thing you know… If I’m going to do this as a business then I better incorporate. And that’s what I did.

One of the things was that I was a bit of a workaholic. When I studied something and it interested me I would really focus on it. So I would actually be sitting there with my paper charts on a weekend, counting the bars on the chart and running the time ratio’s on that and looking at how many times it predicted a change in trend a high percentage of the time. So, I looked at the past and where it worked and then I started projecting forward and it was also working. So that, really got me most interested in it besides the fact that when I would see a confluence of price relationships, those tended to be the strongest setups a far as the Fibonacci price work. Because many people will just do things like look at single levels, you know, a 618 retracement or something like that. And the way I do it is I use multiple price relationships including retracements of price, prior swings, extensions of prior swings and projections of prior swings. I put those altogether and then I look for important confluences of these relationships and when I see something like that that’s when I’ll make a call or watch that particular area for a possible change in the trend in the market.

Cam Hawkins: 

Here’s the last question in this round. What’s been your proudest “moment” as a Fibonacci expert?

Carolyn Boroden:

I also write articles for Real Money Pro, that’s Cramer’s site. And when he shared my work on “Mad Money off the Charts” that was real exciting for me. Because I felt like people were finally paying attention, that this may not work 100% of the time but it does have value and that it’s going a bit more main stream.

Cam Hawkins:

What are you doing differently now that when you first started with Fibonacci?

Carolyn Boroden: 

I’ve started getting a little be more detailed with timing work. One of the things that I found is that symmetry in time that has proved to be extremely valuable, both on intraday charts and daily charts. That, for example, might be where; let’s say you have an up trending chart and within that up trending chart you had prior corrective declines that lasted 15-18 trading days and then, let’s also say the current decline in the uptrend is right around 14 trading days currently. So, you can see it’s very similar to some of those prior corrective declines in the uptrend. Well that if the trend is going to continue, that this is an ideal timeframe to look for the resumption of the rally. Then I’ll use that along with the price work. And when the time work and the price work come together it tends to be one of the highest probability setups and when it doesn’t work the risk is very well defined.

Cam Hawkins:

Does it matter which time frame you use?

Carolyn Boroden: 

It doesn’t really matter, because I’ve seen it work on all timeframes down to a 5 minute. But I have gotten away from doing the real short term stuff. For example, I use to do down to 5 minute charts for Futures traders and we would setup multiple trades every single day. But I’ve kind of backed up and started looking at weekly and daily charts and stocks and stock indexes and then what I’ll do is refine some entries using maybe a 30 minute chart and I think that’s a good place to start. Though, if you are a day trader and want a bunch of micro trades all day long you can take it down to an even lower time frame.

Cam Hawkins:

How long did it take you to go from Fibonacci newbie to expert?

Carolyn Boroden:

I would say I’m still learning. It took me at least 1-2 years before I started getting really good at the work. But in terms of the additional stuff I’ve learned in continuing to do the analysis over the years, I think I’ve really upped my game in the last 5 years. In saying that I’ve taught people what I’m doing and they’ve picked it up within 6 months.

Cam Hawkins: 

How does the mental approach to trading relate to Fibonacci and are there any special techniques you recommend?

Carolyn Boroden:

I know that psychology is really important and typically most people will at least read Mark Douglas’ book “The Disciplined Trader” and books similar to that. I think that’s really important. I think what the Fib work can do is it can allow you to have a bit of an edge if you have the patience to wait for pull backs rather than let’s say buying with emotion. For example the S&P had new highs last week and everybody is saying “Breakout, Breakout”. And, I’m like, you know what, we’re up against resistance so don’t be a buyer at new highs, but after a 30 point pull back in the S&P that we experienced, into support then it was worth looking at and we had a beautiful rebound. So, if you have the patience to wait and follow the numbers and wait for the pull backs and the extensions and all that good stuff. Then you will have the edge that you need, to do better than most in the markets.

Cam Hawkins: 

Do you have a success quote you can share; one that resonates with you personally?

Carolyn Boroden:

I don’t know why it sticks in my head but it’s like “No guts, no glory”. But the only place where that comes into play is… Let’s say the market is trading straight down into a zone and you don’t necessarily trust it, then you have to have good guts to pull the trigger. So, if you don’t pull the trigger and you don’t get involved you’re never going to make any money.

Cam Hawkins: 

What’s your recommended “must read” Fibonacci book?

Carolyn Boroden:

I would have to go with my teacher Robert Miner wrote a book called “Dynamic Trading”. He wrote more than one book but Dynamic Trading has all of the basics in it that I learned from. I don’t really use the Elliott Wave work that comes inside that package. Somebody else might find it useful. But otherwise it has all of the basics that I’m using today and the rest I kind of added just by observing the markets and allowing it to teach me.

Cam Hawkins: 

What sort of influence does Fibonacci have on Elliott Wave theory?

Carolyn Boroden:

I can tell you that it’s related. There are only a couple of times where I’ll talk about an Elliott Wave pattern because there’s too much going back and forth with… Ok, this is the pattern, but “Op’s” now it’s changed, now this is that count. You can’t use that very well when it comes to trading. I think that Elliott Wave, for the experts, that know how to read those charts and get an idea of how far a move can go from it and where something could make a low and a high. That’s great for them, but for me I have to have specifics with the time and price work. For example, if a two-step pattern correlates with a time and price setup that I have then I might mention the two step pattern which is an Elliott Wave pattern. Or, for example, you have a five wave pattern where a move should tend to terminate and it matches up with my work at that time, I might mention it. But otherwise I try and keep it out of the equation because I believe that it confuses people way too much unless you know exactly what you’re doing with it.

Cam Hawkins: 

Do you think or have experience with automated trading systems, i.e. trading robots, using Fibonacci and what are the upsides or downsides of trying to automate Fibonacci?

Carolyn Boroden:

I’ve worked with a few different programmers because people wanted to put my method  in a box. It was extremely difficult to do and basically every single one that I worked with gave up on it. Because they were like “We don’t know how to quantify the swings to use and the percentage changes” and things like that. But one of the things that I have worked with is where I setup the work and a mechanical system is used to trigger into the trade. You know, something that tells you that it’s worth placing a bet against the zone. And that could be something as simple as some moving average cross overs with a few rules. And that can go into a black box. There’s one other company that I believe put together a system where it did run the confluence of the Fibonacci ratios pretty well. But you had to tinker with it and it was like a $15,000 program. So I don’t know anybody that has succeeded more than that, as far as programming this and setting it up that way. So I just keep doing it by hand.

Cam Hawkins: 

Do you think there would be a market for it if they did crack the Fibonacci code and do you think it could do what a human could do?

Carolyn Boroden:

I think it could be awesome, if there was somebody who had the patience to work with me and understand everything that needs to be done. I just haven’t found that yet. The reason why I like to do it by hand is because I like to see the exact price relationships that go into a price cluster for example. Because I know which combinations tend to work better than others. So for example, if I see a price cluster that includes a symmetrical projection a 618 retracement and a 1272 extension, I know that’s a really solid setup. But that’s because I know, from doing the actual work, what is inside that zone that I setup.

Cam Hawkins: 

What Fibonacci related internet resource or tool do you always use?

Carolyn Boroden:

As far as the work that I do, I do it on Dynamic Trader which is created by my mentor. But as far as others, people are using. Thinkorswim has some decent tools on it as far as the price analysis work. The only thing is that I’m waiting for them to fix their timing tool. It will do the timing, it’s just, there’s a little glitch in the way that it reports the timing versus the way that I look at it. But you can do the work on Thinkorswim.

Cam Hawkins:

Are there any trading strategies that you would avoid using Fibonacci?

Carolyn Boroden:

Setting up symmetrical pull backs in a trending market works really well. One of the things that I found over the last five years, and I never use to do this before, is: I would stay away from counter trend trades, typically. Because, why go against the grain, it’s like swimming up-stream and all that good stuff. Well, I’ve actually found reasons to look at countertrend trades when risks are well defined. I’ll give you a good example of this. When Tesla was going straight down a couple of months ago I had both Fibonacci time and price parameters show up suggesting a possible tradable low and I put it out there in advance. And it had over a $60 rally from what started as a countertrend setup where initially you had to be very careful but the risk reward potential on these countertrend setups can be huge. You’re going to risk maybe $3 and you have the potential to make $60. It’s worth looking at if time and price come together.

Cam Hawkins: 

If you could leave our listeners with one piece of advice regarding Fibonacci what would it be?

Carolyn Boroden:

Start with running just basic retracements within a trending market and watch and see how that works for you. And study the market before just blindly taking trades from anybody. I’d have to say, if you wanted the basics I do have some free videos on Youtube where you can look up some of my work and it will talk about some of the retracements, projections and extensions that I use. And I also wrote a book about it so there’s more detail in their as far as trying to set some of this up on your own.

Cam Hawkins:

What was the book called?

Carolyn Boroden:

Fibonacci Trading, Mcgraw Hill. How to master the time and price advantage.

Cam Hawkins: 

What’s the biggest mistake most retail traders make regarding Fibonacci?

Carolyn Boroden:

Making an assumption that either a single level by itself might be important or just blindly waiting for a pullback decision without waiting for a strong indication that it’s worth placing a bet against that decision. Because if the market wants to go it’s going to blow right through your level so you want to wait for confirmation that it’s worth placing a bet against the decisions that you want to identify.

Typically I look at moving average crossovers, taking out a prior swing high or swing low. I do have a free document on my website called “The Guidelines”. It says “How to make money using the video updates”. You can download that and it talks about the moving average cross over that I use and I typically go down to a lower timeframe chart for a trigger. So for example if I have a trade setup on a 30 minute chart then maybe you use a 5 minute chart to trigger an entry. The reason is because you want to find an indication that it’s worth placing a bet against the zone as it’s still relatively close to the zone that you’re defining your risk against. So, for example, we had a trade in IWM Index this morning. We hit and held support on the 30 minute chart and then a 5 minute chart would have triggered you into that trade relatively quickly and that’s already working in your favour.

Cam Hawkins:

Do institutions use Fibonacci and how would we see that manifest itself in the markets?

Carolyn Boroden:

I do believe that quite a few institutions use this. I use to be around people that actually sold some programs that used a lot of the Fibonacci numbers in different algorithms. So I think that it’s definitely used. Also, I have worked with some of the smartest minds on Wall Street in the past because they had me come in and work with them on some of the Fibonacci programs they were using.

As far as how it might affect things. There might be a place where we can anticipate where there might be a change in trend if we’re watching the same things that an Institutional trader might be looking at. And they might have more size than we do to affect the market. So, in that way it’s worth knowing what some of the big players are actually using.

Cam Hawkins: 

Final question. When using Fibonacci what are the 3 most important things to be aware of?

Carolyn Boroden:

One. When you see a clustering of the price relationships that it’s a very important decision. Now, it doesn’t mean that decision will hold or not, but if it does hold it’s worth placing a bet against.

The second thing you want to remembers is that if the market doesn’t do what it’s supposed to do against the zone get the heck out!

The third thing is probably, not necessarily to do with Fibonacci. When you do grab onto a winner try and keep some runners. Because a lot of times you can start with one of these setups where it has very little risk but you get out way too early and if the extensions show that the potential is really healthy you want to try and keep it for the larger run because that, in effect, will make up for some of the smaller losses you may have to take because not every setup is going to play out.

Cam Hawkins: 

We’d like you to help us find exit points for our trading system. We already have a market to focus on (namely the S&P500), and we’re looking for 3 specific Fibonacci techniques we can use to exit a trade in profit or loss.

So Carolyn, to help us find exit points for our trading system what “3 golden nuggets” can you share with us today?

Carolyn Boroden:

One is: many moves tend to terminate at extensions of prior swings. This is something I look at every single day. This is something that I use as price targets for many of the trend trade setups that I identify. So, for example, you take the swing into the zone and then you measure into the extension of 1.272, 1.618 and 2.618. And as soon as you get up towards these extensions I want you to typically book some profits and really start to ratchet up your stops because so many moves will terminate at extensions of prior swings.

Cam: When you say Zones are you talking about the low of the swing?

Yeah, so for example I have a cluster of support. Well, from that price cluster of support, the target for a move off of that zone is going to be the 1272 extension of that high into the low, for example. So then I’ll extend it up 1.272 and so on and that will give me the targets. It’s also in the guidelines that I have for you guys.

That’s one thing. Now there’s another thing that you can do. You can also run projections of prior swings in the same direction. So, for example, if there was a prior rally swing of 1600 points and now the current rally swing from the new low is, let’s say, 1550 and it’s similar to that one. That’s also when I’d have you ratchet up your stops.

The third thing I would have you look at is what I like to call symmetry. Now symmetry is similarity or equality when comparing swings in the same direction. When the symmetry holds in the market you know that the trend is intact and the trend is good. So, what I will tell people is, “As long as the symmetry holds you can stay in the trade, once it breaks – get the heck out!” So, you can fine tune it on a lower timeframe chart to help you squeeze out the last points of a trade (maybe) but then get out before it’s too late and it starts dying.

Cam Hawkins: 

Before we wrap up what’s the best way for traders to get hold of you?

Carolyn Boroden:

Well, I am on twitter under @fibonacciqueen, but my website is also fibonacciqueen.com and there are definitely some free videos and articles you can read. I would also suggest downloading the guidelines as far as how to make money with the videos and you can pair that with the free videos.

Tell me what you thought!

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