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Fibonacci Retracements are an extremely popular in technical analysis. They are created by first drawing a trend line between two extreme points. The vertical distance between those two points is then divided up vertically with horizontal lines placed at key levels. Those levels are placed at the key Fibonacci Ratios of 23.6%, 38.2%, 61.8% and 100%.
It is important to note, that these are typical levels. By default, TradingView offers 11 levels which is much more than the 4 mentioned (though those specific 4 are included). The user has the ability to format the tool to show/hide levels as well as manually change level values and save those changes as templates.
The main use of these levels is that they act as levels of support and/or resistance when price is retracing back from an original advance or decline. These are key levels to take note of when price is correcting or experiencing a counter-trend bounce. The idea is that after an initial move (either a decline or an advance), price will often retrace back towards the direction it came from. The areas or levels defined by the retracement values can give the analyst a better idea about future price movements. Remember that as price moves, levels that were once considered to be resistance can switch to being support levels. The opposite is also true.
HOW TO USE IN TRADINGVIEW
- Navigate to https://www.tradingview.com/
- On the landing page, enter a symbol and click "Launch Chart"
- Drawing Tools are located along the left hand side of the chart. Select the Drawing Tool that you would like to add to your chart.
- You can access the Formatting Window by right clicking on the Drawing Tools in the chart itself and selecting "Format".
Can change the visibility and color of the trend line as well as its thickness and style.
Can toggle the visibility of additional levels. Can also change their color and line thickness.
Extends lines indefinitely.
Reverses the direction of the fib retracement.
Changes the positioning of the labels.
Can toggle the visibility of background colors as well as change their opacity.
Can toggle the visibility of text displaying level values.
Can toggle the visibility of text displaying price values.
Allows for the precise placement of the fib retracement's first point (Price 1) using a bar number and price.
Allows for the precise placement of the fib retracement's second point (Price 2) using a bar number and price.