Chapter 2【Middle Part】: The Labyrinth of Technology — Days Immersed in Studying —

Fibonacci Golden Ratio and the Breath of Candlesticks

Fixed perspective under Dow Theory and the overlap of rationale for horizontal lines and trend lines. In addition, my Discord companions and I fanatically pursued the use of nature’s golden ratio in markets—the 'Fibonacci Retracement'—and the 'Price Action' read from candlestick shapes to gauge buying and selling pressure.

“After a market trend extends in one direction, it always makes a pullback (temporary decline) or a retracement (temporary rise). The rebound points are governed by the same golden ratio found in nature, sunflower seeds and galactic spirals.”

We apply Fibonacci to past charts every night and exhaustively test its rebound accuracy.

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【Fibonacci Retracement Trading Method】

1. How to draw Fibonacci Retracement:

・Connect the starting point and end point of the most recent upwave (low A ➔ high B).

・Then automatically, rebound candidate lines at 23.6%, 38.2%, 50.0%, 61.8%, and 76.4% are displayed.

2. The “golden rebound zones” most noticed by large institutions：

・[38.2%]: a shallow pullback when the trend momentum is extremely strong.

・[61.8%]: the most textbook-like, the strongest rebound line where algorithms of institutions around the world concentrate.

・[50.0%]: not exactly a Fibonacci ratio, but strongly regarded as a half-back in the market.

3. Merging with Price Action (candlestick signals):

・Pin Bar:

A candlestick with an extremely small body and a wick at least twice as long as the body.

A long lower wick pin bar indicates “strong selling pressure once, then pushed back by stronger buying” — a strong rejection.

・Engulfing Bar:

The body of the previous candle is completely enveloped by the next large bullish candle (large bullish and large bearish candles).

A decisive signal that buyers and sellers have completely reversed their power.

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“Look at the pound-yen on the 15-minute chart!” At 2 AM, rubbing tired, bloodshot eyes, I call out to my chat mates.

“Right at the 61.8% Fibonacci line of the upward wave, a long lower-wick pin bar appeared! And the next candle completely swallowed the previous bearish candle with a strong ‘engulfing’! Horizontal lines, Dow Theory, Fibonacci 61.8%, Pin Bar, Engulfing… five bases overlapped!”

“Too perfect, Komugi-san! This is a textbook, iron-clad long point!”

Friends across the screen shout. With so many bases converging at one point, if you don’t buy here you aren’t a trader. I pressed the market buy button without hesitation.

But—right after entry, the market began to fall as if mocking my “perfect justification.” Price violently pierced the Fibonacci 61.8% line and slammed through the recent low.

“Why… why didn’t it rise, despite the Pin Bar and Engulfing Bar?!”

The once iron-clad point, stacked with five fundamentals, instantly morphed into “just a trap” due to a sudden surge of large selling by big players.

V. The Abyss of Wave Theory — Illusions of Elliott and Wolf

“The pattern collapsed because I had missed a higher-order ‘larger wave cycle.’”

Rather than being discouraged by a single fakeout, I stepped into more complex, higher-order wave theory. The Elliott Wave Theory that purportedly decodes market fractals and the Wolfe Wave that uses geometric wedges to forecast future targets.

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【A Professional Framework for Advanced Wave Theory】

1. The basic structure of Elliott Wave Theory:

・Markets form a cycle with a motive 5-wave up (waves 1-5) and a corrective 3-wave down (waves A-B-C).

・[Rule of the Third Wave]: The third wave tends to be the most powerful and longest.

For traders, capturing the third wave that forms from the pullback of the first wave (the so-called wave 3 of 3) is considered the ultimate holy grail.

・Fractal structure: within the 3rd wave of an hourly chart, there are 1–5 waves on the 15-minute chart, and within those, 1–5 waves on the 5-minute chart.

2. Wolfe Wave geometry:

・A theory predicting reversal targets from overextension and energy convergence in a wedge shape.

・Formed by five touchpoints 1-2-3-4-5, where highs and lows converge.

・【EPA Line (Target Line)】: On the extension line connecting Point 1 and Point 4,

the reversal price from Point 5 is predicted to reach in the future—an exceedingly elegant geometric forecast.

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“Now I am inside the daily chart’s Elliott Wave, the third wave; on the 15-minute chart, the third wave’s starting point!” “I’ve reached Wolfe Wave’s Point 5! The volatility should open up toward the EPA line!”

Notes were filled with complex lines and numbers, and the chart had become a fortress almost hiding the candles.

Dow Theory, horizontals, Fibonacci, price action, Elliott Wave, Wolfe Wave. I targeted only moments when all conditions overlapped perfectly, and traded with confidence.

Yet, the deeper the knowledge, the harsher the reality for my account balance.