AUTOMATED FIBONACCI LEVELS AND EXTENSIONS

Description

Fibonacci levels are obtained by connecting the highest and the lowest point of a trend, after the trend has ended. The Fibonacci levels are used by traders as support/resistance levels after the trend change.

This example shows the Fibonacci levels after a positive (bullish) trend.

Automated Fibonacci levels drawing tool in the NanoTrader trading platform.  

The Fibonacci levels (the horizontal blue lines) based on the trend are obtained by connecting the lowest and the highest point of the trend when the trend has ended.

In addition to Fibonacci levels there are also Fibonacci extensions. Fibonacci extensions are used by traders as price targets once the market moves outside the Fibonacci levels.

Click here to activate the free automated Fibonacci drawing package in the store.

The automated Fibonacci drawing package in detail

In theory drawing Fibonacci levels is simple. In practice it is not that simple. Why? Firstly the trader needs to identify a trend. Secondly the trader needs to observe the trend and decide when the trend has ended so he can draw the Fibonacci levels. The automated drawing package solves these two complexities. It identifies the trends and draws the Fibonacci levels and the Fibonacci extensions when it considers the trend has ended.

Traders can choose between 4 technical analysis tools which the package will use to draw the Fibonacci levels and extensions automatically:

1. The SuperTrend indicator
2. The Univers-Bourse trend detector
3. Crossing moving averages
4. Exponential moving average and market price cross

This example shows the SuperTrend indicator. If the SuperTrend is bullish, the chart background is green. If the SuperTrend is bearish, the chart background is red.

Automated Fibonacci lines based on the SuperTrend trend indicator.  

The last completed trend was bullish (green). The Fibonacci levels and extensions are automatically drawn when the trend ends. They are based on the high and the low point of the completed trend.

This example shows the Univers-Bourse trend detector. Light green (or light red) is the start of a trend, dark green (or red) is the confirmation of a trend and white is sideways and thus also the end of the trend.

Automated Fibonacci drawing for traders based on a trend indicator.  

The last completed trend was bearish. The Fibonacci levels and extensions were automatically drawn when the trend ended. They are based on the high and the low point of this completed trend.

Note: the Univers-Bourse trend detector is integrated in the “All today’s trends” screener which is available for free in the NanoTrader platform.

This example shows crossing moving averages to determine the trend. If the trend is bullish, the chart background is green. If the trend is bearish, the chart background is red.

Fibonacci levels and extensions based on crossing moving averages in NanoTrader.  

The last completed trend was bearish (red). The Fibonacci levels and extensions were automatically drawn when this trend ended and are based on the high and the low point of this completed trend.

This example shows the cross between an exponential moving average and the market price used to determine the trend. If the trend is bullish, the chart background is green. If the trend is bearish, the chart background is red.

Drawing Fibonacci levels and extensions based on trends.  

The last completed trend was bearish (red). The Fibonacci levels and extensions were automatically drawn when this trend ended. They are based on the high and the low point of this completed trend.

Fibonacci levels based on time

Some traders use Fibonacci levels and extensions based on time, usually day or week. In other words, they do not draw the Fibonacci levels and extensions based on the last completed trend but on the price evolution of, for example, the current week. Some technical analysis "purists" frown on this method. Nevertheless the method is also integrated in this automated Fibonacci drawing package.

Traders can choose between 5 time frames which the package can use to draw the Fibonacci lines and extensions automatically:

1. Day
2. Week
3. Month
4. Quarter
5. Year

This example shows Fibonacci levels based on the current week.

Range Bar Break-out day trading strategy in NanoTrader.  

It is Tuesday so the Fibonacci levels are based on the high and low of Monday and Tuesday. The extensions are always drawn based on last week’s Fibonacci levels.

Below the main chart, the Fibonacci levels and extensions based on last week’s high and low are also shown. Some traders use this time-based variant but it is not common.

Click here to activate the free automated Fibonacci drawing package in the store.

Practical implementation

Open a chart and select the automated Fibonacci drawing you want to use via Template studies > WHS Store > WHS > Auto Fibonacci.

Click here to activate the free automated Fibonacci drawing package in the store.