Fibonacci Trading

The Fibonacci Trading indicator is a comprehensive technical analysis tool designed to automatically project Fibonacci retracement and extension levels based on market structure and trend filters. It identifies key pullback zones for entries and extension levels for profit targets, helping traders visualize potential wave developments in real-time.

Usage

The indicator automatically identifies support and resistance pivots (fractals) to draw Fibonacci levels. When an upward or downward wave is detected, the script plots:

• Retracement Levels: The "Buy Zone" (long) or "Sell Zone" (short) is highlighted between the 50% and 100% retracement levels.
• Invalidation Points: The 100% level serves as the "Long/Short Invalidation" point, while the 0% level marks the "Break Even" line.
• Extension Targets: Target points (Tp1 and Tp2) are projected using Fibonacci extensions (161.8% and 261.8% equivalent relative to the retracement anchor) to define potential exit areas.

Users can choose between different trading setups to filter which waves are displayed:

• Long Only/Short Only: Restricts the Fibonacci drawings to a single direction.
• MA Cycle: Uses an EMA/SMA crossover logic to determine trend direction.
• RSI_MACD: Uses a combination of RSI overbought/oversold states and MACD crossovers to permit wave detection.
• Gaussian Filter: Filters waves based on whether the price is above or below a Gaussian filter line.

Details

The script utilizes a fractal-based pivot detection system (adjustable via left and right bars) to find the most recent relevant high and low. For upward waves, it measures from the support to the nearest resistance on the right. For downward waves, it measures from the resistance to the nearest support.

The integration of multiple filters (Moving Averages, RSI, MACD, and Gaussian Filter) allows the script to function as a standalone strategy framework. The background coloring provides immediate visual feedback on the current "Cycle" or trend state based on the selected filter.

Settings

Moving Average Cycle

• Period: Adjusts the length for the EMA and SMA calculations used in the trend filter.
• Fill background: Toggles the background coloring based on the MA cycle.

RSI

• Period: Sets the lookback period for the Relative Strength Index.
• Overbought/Oversold: Defines the thresholds for extreme momentum readings (default 70/30).
• Show RSI: Toggles visual labels for RSI extremes on the chart.

MACD

• Fast/Slow/Signal: Standard parameters for the Moving Average Convergence Divergence.
• Show MACD: Toggles the display of MACD signals as circles and arrows on the chart.

Gaussian Filter

• Period: Adjusts the responsiveness of the Gaussian Filter.
• Source: Determines the price input (close, open, etc.) for the filter.

Support Resistance

• Left/Right Bars: Determines the sensitivity of the fractal pivot detection used to anchor Fibonacci levels.

Trading Setup

• Setup: Dropdown menu to select the directional filter (Long Only, Short Only, Both, or specific indicator-based cycles).

FAQ

How do I use the "Buy Zone" and "Sell Zone"?

The colored zones represent the primary retracement area (between 50% and 100%) where traders typically look for pullbacks to join the prevailing trend before price hits the invalidation level.

Can I change the Fibonacci levels?

The script uses fixed common Fibonacci ratios (50%, 61.8%, 161.8%, 261.8%) to maintain a clean interface, but you can adjust the pivot sensitivity in settings to change how the levels are anchored.

How can I access Fibonacci Trading?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.