Auto Fibonacci Retracement level indicator for Tradingview

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The Fibonacci retracement is also called the golden mean or golden section.

It has been used to analyze the proportions of natural objects as well as man-made systems such as financial markets.
 

The mathematics of the golden ratio and of the Fibonacci sequence is intimately interconnected. The Fibonacci sequence is:

The golden ratio is the limit of the ratios of successive terms of the Fibonacci sequence (or any Fibonacci-like sequence).

This Fibonacci retracement level indicator automatically plots 7 support and resistance levels on the chart based on a selected number of bars.

How it works?

It shows the Fibonacci retracement support and resistance levels for a given range and display the corresponding ratio on the right side of the levels. The price range and levels are adjustable by user, you can easily identify the major and minor support/resistance levels from the chart with your desired inputs.

Features and inputs:

• Show Level Label, enable to display the level on chart.
• Range, it's the number of bars used to detect the highest and lowest price. The default value is 300 it means the indicator will plot the Fibonacci retracement based on the price range of last 300 bars.
• If you want to use different ratios other than the default ones, you can change them from input Level1 to Level5.
• You can change the color of each level line from the following available colors: silver, gray, white, maroon, red, purple, fuchsia, green, lime, olive, yellow, navy, blue, teal, aqua, orange.
• The highest and lowest level are auto-detected and can't be changed.
• Line style: you can choose from: Solid, Dotted and Dashed.
  1 is Solid like this: ______________________
  2 is Dashed - - - - - - - - - - - - - - - - - - -
  3 is dotted ............................................

It works on all timeframes and Renko, Heikin Ashi, Bars, Candle and Line chart types.

The Fibonacci Retracement tool is one of the most widely used and respected indicators in technical analysis. Its usefulness doesn't come from predicting the future with magic, but from identifying high-probability zones where price is likely to react, based on the natural ebb and flow of market psychology.

The levels in image (23.6%, 38.2%, 50%, 61.8%, 78.6%, etc.) are not random. They are mathematical ratios derived from the Fibonacci sequence, found throughout nature, and crucially, they are watched by millions of traders worldwide, creating a self-fulfilling prophecy.

Here’s a detailed breakdown of why it's an indispensable tool for traders.

1. It Identifies Potential Support in an Uptrend ("Buy the Dip")

This is its most common and powerful use case. After a significant price move up, the market rarely goes straight up forever. It pulls back. Fibonacci retracements tell you how deep that pullback is likely to go before the original trend resumes.

• Why it's useful: The retracement levels act as potential support during the pullback. Traders watch these levels to place buy orders, creating clusters of demand.

  • Shallow Pullback (38.2%): Indicates a very strong trend. The dip is shallow because buyers are aggressively stepping in.

  • Deep Pullback (61.8% or 78.6%): The "Golden Ratio" (61.8%) is the most watched level. A pullback to this level is common and healthy. It suggests a more significant retracement before the trend continues.

  • 50% Level: While not a true Fibonacci number, the 50% retracement is a key psychological level and is almost always included in the toolset.

2. It Identifies Potential Resistance in a Downtrend ("Sell the Rally")

The same concept applies in reverse for a downtrend. After a strong move down, the market will often have counter-trend bounces (rally). Fibonacci retracements help identify where those rallies are likely to fail.

• Why it's useful: The retracement levels now act as potential resistance. Traders will look to sell or short at these levels, expecting the dominant downtrend to resume.

3. It Provides a Framework for Trade Entries, Stops, and Targets

Fibonacci retracements give you a complete plan for a trade.

• Entry: You look to enter a trade (e.g., go long) as price approaches a key retracement level (like the 61.8% level) and shows signs of bouncing, such as with a bullish candlestick pattern (hammer, engulfing pattern).

• Stop-Loss: Your logical stop-loss is placed just below the retracement level you are trading from. For example, if you buy at the 61.8% level, your stop goes below the 78.6% level. A break below that level invalidates the trade idea.

• Profit Target: Your initial profit target is often a retracement level in the opposite direction or the previous high (Point B).

4. It Confluences with Other Technical Indicators

This is where the real magic happens. A Fibonacci level by itself is interesting. A Fibonacci level that aligns with another technical signal is powerful.

• Price Action: The 61.8% level lines up exactly with a previous support/resistance level.

• Moving Averages: The 50% retracement level is sitting right on the 50-day or 200-day simple moving average.

• Trend Lines: The pullback to the 38.2% level touches an ascending trendline.

• Volume: Volume spikes as price approaches the Fib level, confirming the reaction.

When multiple signals point to the same price level, the probability of a successful trade increases dramatically.

Practical Trading Example (Buying the Dip in an Uptrend)

Let's say a stock rallies from $100 (Swing Low) to $200 (Swing High).

1. Draw the Tool: You apply the Fibonacci retracement from the low at $100 (Point A) to the high at $200 (Point B). The tool automatically calculates key levels:

   • 23.6% retracement: $177.20

   • 38.2% retracement: $161.80

   • 50.0% retracement: $150.00

   • 61.8% retracement: $138.20

   • 78.6% retracement: $122.80

2. Plan the Trade: The stock begins to pull back from $200. You anticipate it will find support at one of these levels. The 61.8% level ($138.20) is often the "sweet spot."

3. Execute:

   • Entry: The price falls and approaches $138.20. You wait for confirmation—a bullish hammer candlestick forms on the chart. You enter a long position at $139.

   • Stop-Loss: You place a stop-loss at $135, just below the next key level (78.6% / $122.80 is too far away for a logical stop; in practice, you'd use the recent swing low). Your risk is $4 per share.

   • Profit Target: Your target is a move back to the prior high of $200. Your potential profit is $61 per share.

4. Risk-to-Reward: This is a 15:1 reward-to-risk ratio, an excellent setup.

Crucial Limitations and Tips for Use

• It's a Zone, Not a Precise Price: Price will rarely reverse at the exact Fib level. Treat each level as a "zone of interest."

• It's Not a Standalone Tool: Never trade based solely on a Fibonacci level. Always wait for price action confirmation (a candlestick reversal pattern) at the level.

• Correct Placement is Key: The usefulness of the tool is 100% dependent on correctly identifying the most significant Swing High and Swing Low. If you draw it between the wrong points, the levels will be meaningless.

• ** subjectivity:** Different traders might choose slightly different swing points. Focus on the most obvious and significant highs and lows.

Summary: Why the Fibonacci Retracement Tool is Useful

In essence, the Fibonacci Retracement is useful because it:

1. Predicts Pullback Depth: It answers the question, "How far will this pullback likely go?"

2. Identifies High-Probability Zones: It pinpoints prices where large numbers of traders are likely to buy or sell.

3. Provides a Trade Plan: It offers logical levels for entry, stop-loss, and profit targets.

4. Creates Confluence: It dramatically increases the odds of a successful trade when it aligns with other technical indicators.

It is a powerful tool for bringing objectivity and discipline to your trading by helping you "buy the dip" and "sell the rally" in a structured, mathematically-informed way.