# Auto Fibonacci retracement indicator Guideline

Auto Fibonacci retracement is an MT4 trading indicator in the technical analysis framework. It aims to determine S/R levels based on precise retracements. To explain, this retracement indicator for MT5 stipulates that the price would retrace by a predictable amount using Fibonacci numbers. Then, the same price will continue its original movement. So, the Fibonacci indicator was invented to anticipate retracement grades on Tradingview charts. This study would demonstrate the importance of the Fibonacci retracement strategy in the FX exchange.

## What is Auto Fibonacci retracement indicator?

Auto Fibonacci retracement indicator is based on Fibonacci number sequences. Discovered by the Italian mathematician Leonardo Bonacci, the number sequence is said to be observed in nature. To clarify, it is calculated by adding the number and its predecessor together (0, 1, 1, 2, 3, 5, 8). Chartists believe that the natural aspect of this mathematical tool can also be applied in technical analysis. Besides, they anticipate satisfactory trading results using it. The Fibonacci retracement goal is to give future areas of support and resistance.

To explain, any asset experiences a price retracement in the opposite direction near these grades. For further explanation, when the current price of the instrument is trading upwards, a correction can happen in the opposite direction. This correction is referred to as retracement. In fact, a downward move may cease near retracement grades. In other words, after reaching one of four retracement grades of: 23.6 percent, 38.2 percent, 61.8 percent, and 76.4 percent.

## How do you draw Fibonacci retracements?

Many retracement levels result from the computation of this analytic tool. In fact, each level represents support in the case of an upward move. Contrarily, resistance in the case of a downward move. For instance, we will consider the 23.6 percent level in the computation process.

### Case of an upside move:

In an upside move, prices are going up. So at some point, the correction will happen downwards. To clarify, the Fibonacci MT4 indicator predicted that the downer retracement level would be equal to:

• Predicted Support = [ Highest point – ( Upside high – Upside low ) × 23.6 % ]

### Case of a downside move:

On a downside move, the price of a security is decreasing. This means that at some point, the prices will start to go up before going down again. The Fibonacci MT5 indicator anticipated that the upper retracement grade would be equal to:

• Predicted Resistance = [ Highest point – ( Downside high -Downside low ) × 23.6 % ]

## How to trade with Fibonacci retracements Indicator?

It is recommended to use the Fibonacci retracement with another tendency indicator. Because the resulting trading system is more reliable than depending solely on retracements. Also, trendlines could be very useful in this case. So, these are a few steps to trade retracements accurately. Firstly, the forex trader needs to identify a strong move zone. That is to say, a trending upward or downward direction. Secondly, a price correction will happen in the opposite direction. Thirdly, the currency trader will select the Fibonacci Tradingview indicator and choose the trendline. This line should link the lowest point to the highest point. Lastly, four stations of S&R will take place on the screen.

### Upward move example

The trendline on the following chart shows a bullish move. Here the pullback move has attained only the 23.6% Fibo grade. Consequently, forex parties seem optimistic regarding the currency pair evolution. Because they are making active buy positions. Thus, chartists can gauge the prevailing of forex players using Fibo grades.

In this example, will use the 23.6 percent level. That means that the predicted S following the price evolution will be at the 1.2026 level. And in case of prices kept going down and breaking the Fibonacci line, we move to a 38.2 percent level and so on.

• Projected S = [ 1.20884 – (1.20884 – 1.172) x 23.6 % ] = 1.2000205

Moreover, this result presents a level at which the price will hit before bouncing back upwards again.

A crypto trader should buy the asset when the corrective downward retracement starts. And since we calculated the upcoming supporting levels, the trader can sell the cryptocurrency back at a higher price after the retracement.

The investor profit in this case would be equal to the difference between the buy and sell price of the chosen asset, multiplied by the quantity acquired. When used correctly, the Fibonacci retracement indicator can assist crypto traders to generate a lot of profits on MT4 charts.

### Downward move example

As a start, the forex trader has to find a clear downward line. Clearly, this line should be linking the highest price level to the lowest price level during the selected period.

Then, using the 38.2 percent Fibonacci retracement level, it is possible for the currency trader to calculate the predicted R level for the chosen percentage as follows :

• Projected R = [ 1.14639 – ( 1.14639 – 1.1376 ) x 38.2 % ] = 1.14303

Similarly, the forex trader should sell the asset at the highest point, before the price starts going downwards. Next, buy it back at a cheaper price before the retracement ends.

The investor gain is the difference between the selling price before it falls, and the buy price just after the retracement.

Here the reversal activity stopped to expand near the 38.2% Fibo level. Consequently, this may signal that the downside move would sustain over time. Thus, there is a high probability that prices would resume falling down afterward.

Auto Fibonacci retracement indicator MT4 belongs to retracement indicators in Metatrader 4. A lot of forex traders use it because of its simplicity and applicability to any trading instrument. Moreover, this MT4 indicator is easy to implement in the MetaTrader 4 platform using Fibonacci grades. Yet, detection of an obvious direction is recommended prior to applying this indicator for more precise predictions on the forex market. Indeed it enables traders to plot support lines, determine resistance levels, and set orders.

Auto Fibonacci retracement indicator MT5 is a technical indicator used in MetaTrader 5 to detect the Fibonacci retracements quickly on your price chart. However, this MT5 indicator can be used by newbies and professional traders as it is very easy. The auto Fibonacci retracement indicator for MT5 is preinstalled in the MetaTrader 5 terminal (picture below). Additionally, the MT5 indicator can be found in Insert/Object and then Fibonacci retracement. This screenshot shows two cases in crypto markets. One in an upward movement. And the other in a downward move.

Auto Fibonacci retracement indicator for Tradingview is found under the trendline button in the Tradingview platform. The highest and the lowest point of the movement must be selected, whether it is up or down. Next, The TradingView platform will provide S/R in different colors for each one of the retracement grades. Here is an example of an upside move.

### Conclusion

In conclusion, Fibonacci retracement is an effective Tradingview indicator. In fact, it arrives to give an approximation of prospective supporting or resisting grades during a retracement. Most importantly, a forex trending market upwards or downwards must always be the reference before thinking to implement a Fibonacci retracement strategy.

### Key takeaways

Fibonacci Retracements are:

• Short-term grades that occur after strong upside or downside moves.
• Generated by the software after linking the highest point with the lowest one.
• Horizontal lines indicating where the price could face support or resistance may occur.
• Composed of 4 retracement levels indicating when the price cannot go below or above.