Home | Sitemap | E-Mail | Help

View Trading Alchemy Showcase

Fibonacci Retracements

 

Leonardo Fibonacci was a mathematician born in 12th century Italy. He is credited with discovering a mathematical principal in which a series of numbers, two of which are added together, will add up to the next number of the series. For example: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55 etc.

This is a series of numbers in which every number has a relationship with the number following it, the number preceding it, as well as every other number in the series. By dividing any larger number by the following larger number you will get approximately 61.8%. So each number is approximately 61.8% of the number following it.

There are many other mathematical relationships possible, but the primary percentages that concern us in technical trading are 23.6%, 38.2%, 50% and 61.8%. These Fibonacci numbers have been rounded for simplicity sake to 25%, 38%, 50%, and 62% for purposes of determining Fibonacci retracements.

In studies of past markets it has been determined that after price makes a significant move and begins to retrace or correct, it tends to move to the levels of 25%, 38%, 50% or 62% of the previous significant move. When price moves to one of the levels and stops, you have a high probability the correction is over and the primary move will resume. Note that the direction of the primary move can be in either direction, up or down. The direction of the primary move is not a factor. In a primary down move, the direction of the correction would be up. In a primary up move, the direction of the correction would be down. The key to using and applying Fibonacci retracement levels is identifying the primary move and calculating the proper retracement levels.

The Alchemy Fibonacci Retracement Indicators automatically calculate the primary trends and then display the appropriate retracement levels in real-time. You will always know the direction of the primary trend and where you are in any corrective phase.

The Alchemy Auto Swing Retracement Indicator calculates swings and displays real time fibonnacci retracements starting from a preset swing point that can be specified with indicator inputs. This indicator also contains a swing end feature in order to display historical swings and their retracements. This retracement indicator is designed to offer the flexibility of picking multiple swing starting points in order to look for confluence on retracement levels between larger swings and more recent swings. For example, if the 62% retracement of the most recent swing is in the same area as the 38% retacement of a larger swing, it makes for a much stronger support or resistance, therefore increasing the reliability of a trend continuation when prices pullback to these retracement confluences. In order to display multiple swings, this indicator can be inserted into the same chart several times with different swing start settings for each indicator. The various swings and retracements can be differentiated by identifying them with a different name such as Swing1, Swing2, etc. Additionally, the colors can be specified individually for each retracement level and swing high/low.

The Alchemy Auto Trend Retracement Indicator calculates swings based on a fast line average which is a proprietary Mid-Keltner calculation and 2 slow moving averages.  When the fast line crosses over both slow moving averages, the trend changes to the upside and a new up swing begins.  Vice versa, when the fast line crosses below both slow moving averages, the trend changes to the downside and a new down swing begins.

The Alchemy Auto Pivot Retracement Indicator calculates swings based on retracement pivots.  When price breaks through a previous retracement pivot low, the previous swing high becomes the new swing start and the new low becomes the swing end.  Vice versa, when price breaks through a previous retracement pivot high, the previous swing low becomes the new swing start and the new high becomes the swing end.

The Alchemy AutoS&PPivRetr Indicator uses the same swing calculations as our Alchemy AutoPivotRetrace Indicator but with default input settings that are optimized for the S&P.

The Alchemy AutoDailyRetrace Indicator automatically calculates the daily swings and displays the daily trend and its retracements.

The Alchemy Fibonacci Retracement tool is an enhanced retracement tool that draws a line from the swing start to the swing end, draws up to 7 fibonacci retracement lines and labels them with their corresponding retracement price.

There are 2 different methods of applying Fibonacci Extensions. In Elliott wave methodology, the Fibonacci Extensions are drawn from the beginning of a swing to the end of the swing (beginning of Wave 1 to end of Wave 3) and then to the retracement point (Wave 4) to find a target price area for the next swing that is expected to resume the trend of the previous swing (Wave 5). Another common method extends the Fibonacci Extensions from the beginning of the swing. In either case, the Fibonacci Extension tool is used to measure the amount the market has extended compared to the overall market movement. This tool uses ratios which are mathematical in nature, derived from the same Fibonacci sequence. Fibonacci Extensions are used for general target price areas.

The Alchemy Fibonacci Extension tool accommodates both methods and it draws a line from the swing start to the swing end. If it is set to use the retracement extension method, it also draws a line from the swing end to the retracement point. It then draws up to 7 projected fibonacci extensions and labels them with their corresponding extension price.

All of the swing and retracement points for both tools can be determined by either moving text object labels or by entering them through inputs.

 

View Other Charts 

Bar Pattern Analysis

Breakout

Divergence

Engulfment & Reversal

Fibonacci Retracements

Floor Traders Mid Points

Floor Traders Pivot Points

Gap

High Low Mid Points

Intraday Time Zones

MACD Signal Line-%Ds Hook

Multiple Moving Averages Crossover

Open/High/Low/Close

Overbought/Oversold

Rolling Floor Traders Pivot Points

Strong Trend

Support & Resistance Pivot Points

Trailing Stop

Trend Catcher

Read More About

Bar Pattern Analysis

Breakout

Divergence

Engulfment & Reversal

Fibonacci Retracements

Floor Traders Mid Points

Floor Traders Pivot Points

Gap

High Low Mid Points

Intraday Time Zones

MACD Signal Line-%Ds Hook

Multiple Moving Averages Crossover

Open/High/Low/Close

Overbought/Oversold

Rolling Floor Traders Pivot Points

Strong Trend

Support & Resistance Pivot Points

Trailing Stop

Trend Catcher


     
Neither TradeStation Technologies nor any of its affiliates has reviewed, certified, endorsed, approved, disapproved
or recommended, and neither does or will review, certify, endorse, approve, disapprove or recommend, any trading
software tool that is designed to be compatible with the TradeStation Open Platform.

 

IMPORTANT INFORMATION:
Government regulations require disclosure of the fact that past performance, whether actual or indicated by historical tests of strategies or indicator methods, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options futures or forex); therefore, you should not invest or risk money that you cannot afford to lose. Any advisory or signal generated by Trading Alchemy indicators or strategies is provided for educational purposes only and any trades placed upon reliance on Trading Alchemy indicators or strategies are taken at your own risk for your own account. Consult your broker or advisor prior to making any investment decisions. The information made available on this Website is not an offer to buy or sell securities, securities derivative, futures products or off-exchange foreign currency (forex) transactions of any kind.  All proprietary technology of Trading Alchemy indicators and strategies is owned by Alchemy Trading Technologies, Inc.

 

All content on this site is Copyright 2017 Trading Alchemy
Privacy Policy Terms & Conditions

 
2017 Trading Alchemy