Fibonacci retracements is a popular instrument used by technical analysts to determine support and resistance areas. In technical analysis, this tool is created by taking two extreme points (usually a peak and a minimum) on the chart and dividing the vertical distance by the key Fibonacci coefficients equal to 23.6%, 38.2%, 50%, 61.8%, and 100%.
Once these levels are defined, horizontal lines are then drawn and used to determine possible support and resistance levels.
When using the Auto Fibonacci Retracement (Auto fib) indicator, there is no need to explicitly set two points, as is done when using the Fib Retracement tool. The indicator will do everything for you.
To use this tool, open Indicators on your chart and find Auto Fib Retracement in the Built-ins tab.
You can also find it in Pine Editor via the new tab - Auto Fib Retracements.
Auto fib retracement was developed for technical analysis and is mainly used to better understand and define support and resistance levels in the market. It is named after its use of the Fibonacci sequence and is based on the theory that markets will retrace an anticipated section of a specific move and then continue moving in its initial direction.
Deviation is a multiplier that affects how much the price should deviate from the previous pivot in order for the bar to become a new pivot.
Depth affects the minimum number of bars that will be taken into account when building.
Extend Lines Left/Right is an infinite extension of lines on the chart to the left / right.
Reverse is the reverse order of lines.
Prices displays all prices.
Levels displays all levels.
Levels Format is the format for displaying levels. It can incorporate Values and Percent values.
To sum up, this has been a long awaited indicator that we are happy to add in to our ever-growing list of tools for technical analysis. Many traders and investors value this tool and use Fibonacci ratios and retracements to then place trades within long-term price trends. Auto fib retracement can be even more successful when used with other tools and indicators.