Fibonacci Retracements


Fib. Retracement
Fib. Retracements are a drawing tool with a calculation function. You as the user define the start and end point of the price levels that are to be used for the calculation. You can base your decision on price or correction movements.

Between these two price levels, the retracement lines are drawn according to the numerical proportion of the Fibonacci numerical series. The calculation is based on the golden section. The theory behind using Fib. Retracements for chart analysis is that price movements have rhythms similar to natural processes.

Fib. Retracements may be used for:
  • finding course aims of correction movements
  • finding course aims of trend movements
  • finding price targets of breakouts
  • judging the market and its trends
  • finding potential entry points at swing points
You can find the tool in the Chart Tools group in the toolbar.

Entering Fibonacci Retracements

  1. Open a symbol chart.
  2. Click on the Fib. Retracements tool in the toolbar.
  3. Click into the chart to set the start point of the price development (this is the 0% level).
  4. Keep the mouse button pressed and move the pointer to the end point of the price development (this is the 100% level). Release the mouse button.
Between the 0 and 100% levels, the calculated lines are drawn. The horizontal position of the anchor points can be changed without effect. Only the distance between the resulting lines is important.

For extrapolating values beyond the 100% level, you can set the corresponding lines to visible (e.g. for 138.2% and 161.8%). To do so, select the check boxes in the property inspector in the toolbar.

Direction-Dependent Analysis


Upwards Movement

Downwards Movement
For the sensible usage of the Fib. Retracements, it is important to enter the lines correctly into the chart. The start and end points have to be placed differently depending on whether you wish to analyze correction movements or trend movements.

Analysis of Upwards Movements

  • For finding possible correction levels in an upwards movement, draw the line from the high to the low point of the movement. This puts the 0% level at the high and the 100% level at the low point. The standard lines that are displayed separate the trend movement into the possible correction levels.
  • To find possible future price levels of an upwards movement, however, draw the line from the low to the high point. Then set the levels beyond 100% to visible by selecting them in the properties.

Analysis of Downwards Movements

  • For finding possible correction levels in a downwards movement, draw the line from the low to the high point of the movement. This puts the 0% level at the low and the 100% level at the high point. The standard lines that are displayed separate the trend movement into the possible correction levels.
  • To find possible future price levels of a downwards movement, however, draw the line from the high to the low point. Then set the levels beyond 100% to visible by selecting them in the properties.

Editing Fib. Retracements

  • To change the 0% and 100% marks, click the anchor point of the respective line (the mouse pointer changes into an x-y axis symbol) and move it. The line positions will be adapted accordingly.
  • To move Fib. Retracements, drag them with the mouse (the mouse pointer turns into a hand symbol) and move it freely. Release the mouse button when done.
  • You can edit the ratio of each Fib. line in the retracements. To do so, click on the numbers next to the check boxes (in the properties) and enter new values.
  • You can duplicate the Fib. Retracements by double-clicking on them.
  • When the Fib. Retracements are selected, you can edit the properties in the toolbox.
  • The alert function is available for Fib. Retracements. To set an alert, set the Alert Mode from Disabled to one of the options (see below).
  • To delete the Fib. Retracements, right-click on them and select Delete from the context menu. Alternatively, select the Fib. Retracements and press the DEL key.

Properties

Fib. Retracements Properties

% 1, % 2... - Select from the list of available Fib. levels the ones you want to display. You can edit the values by clicking on the numbers to the right of the check boxes and entering new ones.

Extend Left/Extend Right - Select whether the lines are to be extended to the left and/or right until the edge of the chart.

Modus - Select whether the lines are to be displayed in linear or logarithmic scale.

Graphic Properties

The following properties can be set for the Fib. Retracements tool:

Color - Here you can select a line color.

Width - Here you can set a width for all lines by entering a number.

Style - Here you can select a line style, e.g. solid or dotted.

Labels - Here you can set the value label for the lines to visible or hidden. In Tradesignal you can also specifiy the location at which the label should be displayed.

Show Guide Line - Here you can select whether the guide line (the line connecting the two anchor points of the 0% and 100% lines) is visible or hidden.

Alert Properties

The Retracements tool can be used with various kinds of alerts.

Alert Direction - Here you can select from the list whether crossings of all types lead to alerts or only crossings in a certain direction.

Alert Mode - Here you can select an alert mode from the list. Select whether crossing raises an alert always, once per bar or once overall.

Alert Name - Here you can specify a name for alerts generated by this tool. It will be included in the signal field of the alert.

Alert Trigger - Here you can select when an alert should be triggered.
  • Crossed: Triggers when the price crosses the tool, e.g. goes from below the tool to above the tool
  • Hit or Crossed: Same as above, but also triggers when the price merely hits the tool. This setting is useful for a Point&Figure Chart.
For further information on alert modes, see Alerts.