Set Fibo Price Indicator For MT4

The Set Fibo Price Indicator For MT4 inputs asset prices at the Fibonacci retracement levels. The default Fibonacci tool on MT4 only marks the percentage retracement levels on a chart. To include the corresponding price levels, all you need to do is draw your fibs on chart and then put the Set Fibo Price Indicator For MT4. The indicator automatically takes the value of the Fibonacci level and then converts it to text that is graphically displayed on an underlying asset’s chart.

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What is Fibonacci Retracement?

Fibonacci levels were discovered by Italian mathematician Leonardo “Fibonacci” Pisano in the 13th century. Fibonacci was the first to introduce the use of Arabic-Hindu numerals in Europe, and developed a sequence of numbers - 0, 1, 1, 2, 3, 5, 8, 13, 21, etc. Each number in the sequence is the sum of its two predecessors. Another remarkable aspect of this sequence is that each number is approximately 1.618 times greater than the prior number. This common ratio between every number in the sequence is the foundation of the retracement levels used in financial trading.

How is Set Fibo Price Indicator For MT4 Plotted on Chart?

MT4’s default Fibonacci Retracement Levels can be setup by selecting two extreme price points on a chart and then dividing the vertical distance by the Fibonacci ratios. 0.00% is the starting point of the retracement, while 100.00% represents a complete reversal to the original point of the move. The most important Fibonacci levels are 23.600%, 38.2% and 61.80%, which are then horizontally plotted on the price grid to locate likely price reversal points.

After the Fib levels have been charted, traders need to super-impose the Set Fibo Price Indicator For MT4 to automatically get the respective Fibonacci price levels printed on the price chart.

Fibonacci levels are used in many other technical analysis studies like Elliott Wave theory, Gartley patterns and Tirone levels. Another standout feature of Fibonacci retracement is that they, unlike moving averages, are static price points. This static nature of Fibonacci levels helps in easy and quick identification, allowing traders and investors to anticipate reversal in price action.

How to Integrate Set Fibo Price Indicator For MT4 in to a Trading System?

The Set Fibo Price Indicator For MT4 can be applied by traders to zero in on buying areas after a bull market pullback, and shorting zones after a bear market rally. It is always prudent to add momentum indicators like MACD and Stochastics to increase the odds of successfully pinpointing the most advantageous entries. When a Fibonacci level overlaps with turning points in an indicator, the expected support or resistance becomes even more fortified.

Based on the depth of the Fibonacci level, a 23.60% retracement is considered to be relatively shallow, found during flag or pennant consolidation patterns. Shallow retracements happen often, but profiting from them requires close monitoring and a quicker trade trigger. Pullbacks in the 38.20%-50.00% range are considered moderate, and happen during triangle and wedge patterns.

The most significant Fibonacci level that traders invariably watch out for is 0.618, which is the inverse of golden ratio (1.618). The 0.618 retracement generally tends to be the maximum level up to which a contra-trend reversal extends, where the final buyers or sellers throw in the towel for price to resume its broader trend. Most traders wait for a bullish or bearish candlestick to complete above or below a Fibonacci level to confirm the existence of support or resistance before initiating a trade.

Final Thoughts

The Set Fibo Price Indicator For MT4 can be used to identify the end of a counter trend bounce. Counter trend bounces typically retrace a certain portion of the prior price move. The 38.2% to 61.8% zone provides the maximum opportunities to profit. Reversals areas should ideally be confirmed with momentum indicators, classical chart patterns, candlestick patterns, or volume analysis. The more odds you stack in your favour, the more robust will be the corresponding “buy” or “sell” signal.

 

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