Fibonacci Levels with MACD Confirmation

How to Understand and Use the Fibonacci Levels with MACD Confirmation Script
This custom Pine Script is designed to give traders a clear visual framework by combining dynamic Fibonacci retracement levels, MACD histogram confirmation, and volatility-based swing zones. It aims to simplify trend analysis, improve entry timing, and adapt to various market conditions.

How to Interpret the 23.6% & 61.8% Labels
These Fibonacci levels represent key retracement zones where price often reacts during trend pullbacks or reversals.

The 23.6% level indicates a shallow retracement, useful in strong trends where price resumes early.

The 61.8% level is a deeper retracement, often a "last line of defense" before trend invalidation.

The script labels these zones with "CC 23.6" and "CC 61.8" when the price crosses them with MACD histogram confirmation:

Green label (CC) = bullish confirmation

Red label (CC) = bearish confirmation

How to Modify Inputs (Manual Adjustments)

Input Purpose Default How to Use
ATR Period Measures volatility 14 Increase for smoother, slower reactions; reduce for faster swings
Min Lookback Minimum bars for swing zone 20 Avoids short-term noise
Max Lookback Cap for swing zone scan 100 Avoids excessively wide retracement levels
Inverse Candle Chart Flips high/low logic false Enable for inverted analysis or backtesting "opposite logic"
How to Use the Inverse Candle Chart Option
Activating inverse mode flips candle logic:

Highs become negative lows, and vice versa.

Useful for:

Contrarian analysis

Inverse ETFs or short-biased views

Backtesting reverse-pattern behavior

How to Adjust the Style
You can manually personalize the script’s visual appearance:

Change line width in plot(..., linewidth=2) for bolder or thinner Fib levels.

Change colors from color.green, color.red, etc., to suit your theme.

Modify label.size, label.style, and label.color for different labeling visuals.

Customize MACD histogram style from plot.style_columns to other styles like style_histogram.

How the MACD is Set and Displayed
The MACD uses non-standard values:

Fast Length = 24

Slow Length = 52

Signal Smoothing = 18

These values slow down the indicator, reducing noise and aligning better with medium- to long-term trends.

MACD histogram is plotted directly on the main chart for faster, on-screen decision making.

Color-coded histogram:

Green/Lime = Bullish momentum increasing or steady

Red/Maroon = Bearish momentum increasing or steady

How to Use the Indicator in Real-World Trading
This indicator is most effective when used to:

✅ 1. Spot High-Probability Trend Continuation Zones
In a strong trend, price will often retrace to 23.6% or 61.8%, then resume.

Wait for:

Price to cross 23.6 or 61.8

MACD histogram rising (bullish) or falling (bearish)

"CC 23.6" or "CC 61.8" label to appear

🟢 Entry Example: Price retraces to Fib 61.8%, crosses up with green MACD histogram → take long position

✅ 2. Validate Reversal or Breakout Zones
These Fib levels also act as support/resistance.

If price crosses a Fib level but MACD fails to confirm, it may be a fake breakout.

Use confirmation labels only when MACD aligns.

✅ 3. Add Volatility Context (ATR) for Risk Management
The ATR label shows both value and %.

Use ATR to:

Set dynamic stop-losses (e.g., 1.5x ATR below entry)

Decide trade size based on volatility

How to Combine the Indicator With Other Tools
You can combine this script with other technical tools for a powerful trading framework:

🔁 With Moving Averages
Use 50/200 MA for overall trend direction

Take signals only in the direction of MA slope

🔄 With Price Action Patterns
Use the Fib/MACD signals at confluence points:

Support/resistance zones

Breakout retests

Candlestick patterns (pin bars, engulfing)

🔺 With Volume or Order Flow
Combine with volume spikes or order book signals

Confirm that Fib/MACD signals align with strong volume for conviction

✅ Trade Setup Summary

Criteria Long Setup Short Setup
Price at Fib Level At or crossing Fib 23.6 / 61.8 Same
MACD Histogram Rising and above previous bar Falling and below previous bar
Label Appears Green "CC 23.6" or "CC 61.8" Red "CC 23.6" or "CC 61.8"
Optional Filters Trend direction, ATR range, volume, price pattern Same