AutoFib User Guide

Overview and Features

Fibonacci retracement is a popular tool in technical analysis that utilizes Fibonacci sequence ratios to identify potential levels of support and resistance. These levels can indicate possible reversals, continuations, or pauses in the price trend. Based on the sequence introduced by Leonardo Fibonacci, these ratios (23.6%, 38.2%, 50%, 61.8%, and 100%) are widely used in chart analysis, especially in trending markets, to help traders anticipate where price retracements might find support or resistance.

The AutoFib Tool brings Fibonacci analysis to new heights, making it ideal for both novice traders seeking understanding and advanced traders refining strategies. This tool identifies key Fibonacci levels automatically, making the analysis process straightforward and efficient. Fully customizable, the AutoFib Tool adapts seamlessly to your trading style and provides clear, actionable signals directly on your MT5 charts.

Key Features

  • Fully Customizable Fibonacci Levels: Define your own Fibonacci retracement and extension levels to match your trading strategy. From 0.236 to 1.618 and beyond, the choice is yours.
  • Dynamic Entry Control: Set minimum and maximum bar widths, pattern strength, and height parameters to fit your precise criteria for trade entries. Control how patterns form and filter out noise for clearer signals.
  • Advanced Strength and Range Filters: Control pattern strength and filtering with flexible strength multipliers and ranges, ensuring only the strongest setups show up on your chart.
  • Multi-Timeframe Scanning: Run your Fibonacci strategy across multiple timeframes on a single chart. Note: To use this feature effectively, fully load tick data for your desired timeframe.
  • Pattern Matching and Filtering: Show only patterns that meet your custom criteria to eliminate unnecessary setups, focusing on high-probability setups aligned with your plan.
  • Compatible with EAsiTrader EA: Provides signals to NTL EAsiTrader EA for automated trading.

The AutoFib Tool is a versatile indicator that enhances traditional Fibonacci analysis, providing traders with reliable retracement levels and customizable features that adapt to various trading strategies and styles.

Installation and Settings

This section provides the installation steps for setting up the AutoFib Tool on the MQL5 platform, as well as detailed explanations of customizable settings to configure it for optimal performance.

Installation

  1. Installing the Indicator:

    • Download the AutoFib Tool (Retrace.ex5) and place it in the Indicators\NTL folder of your MQL5 platform directory. If the folder doesn’t exist, create it manually.
    • Typical path: Terminal -> MQL5 -> Indicators -> NTL. Restart the platform to make it appear in the Navigator panel.

  2. Applying the AutoFib Tool to the Chart:

    • Open the desired chart (symbol and timeframe).
    • Drag the AutoFib Tool from the Navigator panel onto your chart.
    • Configure the Input settings to customize Fibonacci levels, display options, and other parameters.

  3. Customizing Settings:

    • Access Input settings via the Navigator panel or by double-clicking the indicator on the chart.

  4. Verifying the AutoFib Tool’s Functionality:

    • Observe the Fibonacci lines on the chart, each corresponding to a retracement level.
    • Tip: Experiment with different configurations in a demo environment to find the optimal setup.

  5. Saving Your AutoFib Template:

    • Save your preferred settings as a template (Right-click on the chart -> Template -> Save Template), and give it a descriptive name, e.g., AutoFib_Custom.

Please Note:

To receive signal alerts and manage trades automatically, EAsiTrader is required. NTL EAsiTrader EA enables full functionality for signal generation and automated trade management, providing seamless integration for a complete trading experience.

Settings

  • Timeframes:

    • This setting allows you to select one or more timeframes from which to analyze price data, regardless of the chart’s current timeframe. This feature is helpful if you want to analyze retracements on higher timeframes than the one currently displayed, giving you a multi-timeframe perspective. Timeframe must be greater than or equal to the chart’s timeframe. If left blank, the tool will use the chart’s current timeframe.

  • Fib Levels CSV:

    • Define Fibonacci retracement levels as a comma-separated list, e.g., 0.0, 0.236, 0.5. The tool supports up to seven levels from -2.0 to 2.0.

  • Min Fib Width In Bars:

    • Set the minimum width in bars for the Fibonacci pattern. This is ignored if set to 0.

  • Max Fib Width In Bars:

    • Set the maximum width in bars for the pattern. This is ignored if set to 0.

  • Min Fib Height in ABH:

    • Specify the minimum height in Average Bar Height (ABH) for a valid pattern. Ignored if 0.

  • Max Fib Height in ABH:

    • Define the maximum height in ABH for the pattern. Ignored if 0.

  • Max Fib Range In Bars:

    • Set the maximum range in bars before the pattern is removed. Ignored if set to 0.

  • Min Fib 0:100 Strength Difference:

    • Define the minimum strength difference between the 0% and 100% Fibonacci levels.

  • Min Fib 0:100 Strength Multiplier:

    • Set a multiplier for the strength at the 100% level relative to the 0% level.

  • Min Fib 100 Strength:

    • Specify the minimum strength of the 100% retracement level.

  • Max Fib 100 Strength:

    • Define the maximum strength for the 100% retracement level.

  • Max Lookback In Bars:

    • Set the maximum number of bars to look back in history.

  • Fib Zone Levels CSV:

    • Define Fibonacci zones to highlight, listed as a CSV, e.g., 0.5, 1. Separate multiple zones with semicolons.

  • Fib Pattern Bits:

    • Defines a bit pattern that the trader can define to filter out unwanted Fibs. A zero bit denotes a bearish Fib and a 1 bit denotes a bullish bit. For example, binary 111 refers to a sequence of 3 bullish Fibs. binary 100 refers to a sequence of one bullish Fib followed by two bearish Fibs, in chronological order.

  • Fib Pattern Size In Bits

    • Defines the size of the Fib Pattern in number of bits, up to 50 bits.

  • Show Only Matches

    • If true, then only Fibs that match the Fib Pattern Bits will be shown on the chart.

Bar Strength

The strength of a bar is determined by counting the number of preceding bars (to its immediate left) that have a higher low (for low bar strength) or a lower high (for high bar strength). The count stops when the first bar with a higher low (for low bar strength) or a lower high (for high bar strength) is encountered.

Using the Indicator

The AutoFib Tool provides a streamlined way to analyze Fibonacci retracement levels, identifying potential reversal or continuation points within a trend. By configuring the indicator settings to match the current market trend, traders can use this tool to anticipate price movement effectively.

Interpretation and Application of Fibonacci Levels

Each Fibonacci retracement level has distinct trading implications:

  1. 23.6% Level:

    • Description: Indicates a minor retracement, likely within a strong trend.
    • Trading Significance: Suitable for quick entries on minor pullbacks, anticipating trend continuation.
    • Interpretation Tips: This level can be skipped if the trend is expected to have a deeper retracement.

  2. 38.2% Level:

    • Description: Moderate retracement often indicating that the trend has paused.
    • Trading Significance: Signals potential continuation, useful for placing entry orders.
    • Interpretation Tips: Aligns well with short-term trend-following strategies.

  3. 50% Level:

    • Description: Midpoint between extremes, widely considered a psychological level.
    • Trading Significance: Often signals a stronger continuation point.
    • Interpretation Tips: Look for confirmations, as this level may indicate the halfway point of a larger move.

  4. 61.8% Level:

    • Description: Known as the Golden Ratio, representing a strong reversal potential.
    • Trading Significance: Major reversal level, often used by institutional traders.
    • Interpretation Tips: When combined with volume or other indicators, it strengthens the likelihood of a reversal.

  5. 100% Level:

    • Description: Full retracement to the origin, often marking trend exhaustion.
    • Trading Significance: Indicates reversal or a trend change.
    • Interpretation Tips: Use caution, as price movement beyond this level may signal trend breakdown.

Advanced Usage and Strategy Integration

Indicator Buffers

The AutoFib indicator provides data across six buffers, each containing essential Fibonacci and trend analysis values. These buffers can be accessed when integrating the AutoFib indicator with other indicators or Expert Advisors (EAs).

  • Buffer 0: Fib Level 0 values (0% Level)
  • Buffer 1: Fib Level 1 values (100% Level)
  • Buffer 2: Bar Strength values
    • Bits 0-23: High bar strength values
    • Bits 24-47: Low bar strength values
  • Buffer 3: Fib Shift values
    • Bits 0-19: 0% level shift value
    • Bits 20-39: 100% level shift value
    • Bit 40: Fib Type bit (0 = Bearish, 1 = Bullish)
    • Bit 41: Fib Match bit (1=the recent Fibs match the specified Fib pattern)
  • Buffer 4: Fib Type History
    • Bits 0-49: Records the last 50 Fib Type bits
  • Buffer 5: Signal Flag values (Trend, Signal)
    • Trend:
      If (FibShift is 0) Then Trend = None ElseIf Fib Type is 1 Then Trend = Bullish Else Trend = Bearish
    • Signal:
      ForEach (Zone in Zones) If (Price Touches Zone) Return Trend
      Return None.

Confluence

Using Fibonacci retracement alone can provide valuable insights, but combining it with other confirmation signals can significantly enhance its effectiveness. By integrating additional technical indicators, you can gain more robust signals, reduce false entries, and refine your entry and exit points. Here are some of the most reliable confirmation indicators to use alongside the AutoFib Tool.

Moving Averages

Moving averages are commonly used to confirm trends and provide support or resistance in trending markets. Combining them with Fibonacci retracement levels can add confidence to your trades.

  • Using a Moving Average Cross: If a short-term moving average (e.g., 10-period) crosses above a long-term moving average (e.g., 50-period), this may signal an uptrend, particularly if it aligns with a Fibonacci level like 38.2% or 50%. Conversely, a short-term moving average crossing below a long-term average may confirm a downtrend.
  • Dynamic Support/Resistance: In a trending market, moving averages can act as dynamic support or resistance levels. If a Fibonacci retracement level coincides with a moving average, it strengthens the likelihood of a price reaction at that level.
  • Example: In a bullish scenario, if price retraces to the 50% Fibonacci level while touching the 20-period moving average, this convergence of levels suggests a strong support zone and an opportunity to enter a long position.

Relative Strength Index (RSI)

The Relative Strength Index (RSI) is an oscillator that measures the speed and change of price movements, typically identifying overbought and oversold conditions. RSI can be a valuable confirmation tool when combined with Fibonacci retracement.

  • Overbought/Oversold Levels: If price retraces to a Fibonacci level and RSI indicates oversold conditions (below 30), this can confirm a potential upward reversal, making it a good entry for a long position. Conversely, if RSI shows overbought conditions (above 70) at a Fibonacci level in a downtrend, it may confirm a shorting opportunity.
  • Divergence: RSI divergence occurs when the price makes higher highs while RSI makes lower highs (or vice versa). If divergence occurs near a key Fibonacci retracement level, it strengthens the signal that a reversal might occur.
  • Example: In a bearish market, if price pulls back to the 61.8% Fibonacci level and RSI shows overbought conditions, this could be a signal to enter a short trade as the trend may continue downward.

MACD (Moving Average Convergence Divergence)

MACD is another powerful indicator that can help confirm the direction and strength of a trend. The indicator consists of two moving averages (MACD line and Signal line) and a histogram, which can be helpful in confirming trades at Fibonacci levels.

  • MACD Crossovers: A bullish crossover (when the MACD line crosses above the Signal line) near a Fibonacci level may confirm an upward reversal, whereas a bearish crossover can confirm a downtrend. Crossovers that align with retracement levels add strength to the signal.
  • Histogram Momentum: The MACD histogram shows momentum changes in the market. When the histogram increases in height near a retracement level, it can signal growing momentum in the direction of the trend. A decreasing histogram near a Fibonacci level can indicate weakening momentum and a potential reversal.
  • Example: In a bullish trend, if price retraces to the 38.2% Fibonacci level and the MACD histogram begins to expand, this indicates momentum is increasing in the direction of the trend, providing confirmation for a long entry.

Volume Analysis

Volume is a critical component in technical analysis, as it reflects the intensity behind a price move. When used in conjunction with Fibonacci retracement, volume can provide essential clues about the likelihood of a trend continuation or reversal.

  • Volume Spike at Retracement Levels: An increase in volume near a Fibonacci level can confirm that the level is significant. For example, if price retraces to the 50% level in a downtrend with a spike in selling volume, this confirms bearish strength and may signal a continuation downward.
  • Decreasing Volume on Pullbacks: If volume declines as price pulls back to a Fibonacci level, this suggests that the retracement is weak, and the trend is likely to resume. This can be a good confirmation signal for entering trades in the direction of the main trend.
  • Example: In a bullish trend, if price retraces to the 61.8% level and volume decreases significantly, this suggests a low likelihood of reversal, indicating that the trend may resume upward.

Candlestick Patterns

Candlestick patterns provide immediate visual clues about market sentiment and potential reversals. Key patterns near Fibonacci levels can be highly effective in confirming entry points.

  • Reversal Patterns: Patterns like the Hammer, Shooting Star, Engulfing, and Doji near a Fibonacci retracement level can signal a potential reversal. A bullish engulfing pattern at the 38.2% level, for example, could confirm an entry in a bullish trend.
  • Continuation Patterns: Patterns like Rising Three Methods and Falling Three Methods near Fibonacci levels can signal trend continuation. If you spot a continuation pattern at the 23.6% or 38.2% level, it may confirm that the trend is likely to resume.
  • Example: In a bearish retracement scenario, a Shooting Star pattern appearing at the 50% Fibonacci level can be a strong confirmation to enter a short position.

Multi-Timeframe Analysis

Checking Fibonacci retracement levels across different timeframes can improve the reliability of signals. By aligning retracement levels on higher and lower timeframes, you gain a broader perspective on the market trend.

  • Higher Timeframe Confirmation: If a Fibonacci retracement level on a daily chart coincides with a level on an hourly chart, this strengthens the probability of a significant price reaction.
  • Aligning Trends: Use higher timeframes (e.g., H4, D1) to determine the overall trend direction, then use lower timeframes (e.g., M15, M30) for precise entries at Fibonacci levels within the primary trend direction.
  • Example: In a daily uptrend, if price retraces to the 61.8% level on the daily chart and aligns with a similar retracement on the hourly chart, this convergence signals a strong support level, reinforcing a long entry.

Conclusion: Building a Layered Approach with Confirmation Signals

Combining Fibonacci retracement with these confirmation signals creates a layered approach that improves decision-making and trading precision. Using Moving Averages, RSI, MACD, Volume Analysis, Candlestick Patterns, and Multi-Timeframe Analysis together with Fibonacci retracement can:

  • Enhance the reliability of retracement levels.
  • Provide a well-rounded understanding of market conditions.
  • Strengthen entries and exits by filtering out weaker signals.

For optimal results, apply confirmation signals that align with your trading strategy and risk tolerance, creating a more comprehensive approach to using the AutoFib Tool in dynamic market conditions.

Insights

The AutoFib Tool’s insights provide traders with a deeper understanding of market dynamics by revealing zones where price may react, offering either a potential reversal or continuation of trend. This is particularly valuable in identifying areas where traders might adjust their positions, set stop losses, or place entry orders to capitalize on anticipated market movements. By analyzing retracement levels, traders can gauge market sentiment and assess the strength of current trends with greater confidence, which is essential in volatile trading environments.

Additionally, these insights serve as a strategic tool for refining entry and exit points, allowing traders to take advantage of natural price fluctuations within a trend. The indicator highlights key Fibonacci levels that often act as psychological price barriers in the market. Recognizing these levels empowers traders to align their strategies with market behavior, improving the likelihood of successful trades based on historical retracement tendencies observed in various asset classes.

Key Patterns to Watch For

  • Reversal Patterns: Candlestick formations, such as hammers, engulfing patterns, or doji candles, are strong indicators of potential reversals when they appear near Fibonacci retracement levels. For instance, an engulfing candle observed at the 61.8% retracement level often signals a high-confidence reversal, marking a favorable entry or exit point. These patterns, when combined with Fibonacci levels, provide a powerful visual cue for potential market reversals, helping traders anticipate shifts in trend direction.

  • Continuation Patterns: When price respects Fibonacci levels at the lower end of the range, like 23.6% or 38.2%, it may indicate that the trend will continue with strength. These levels suggest minor retracements within a strong trend, offering traders an opportunity to enter positions in alignment with the current direction. Identifying such continuation patterns allows traders to capitalize on trending markets with greater confidence, knowing that these levels often signify support within a robust trend.

  • Breakout Signals: Occasionally, price may surpass the 100% retracement level, indicating trend exhaustion or a possible breakout. Observing this behavior, particularly when accompanied by high trading volume or increased volatility, can help traders confirm a strong shift in market direction. Breakouts beyond the 100% level often lead to new trends, and recognizing this signal early can provide an advantageous entry into emerging trends.

  • Support and Resistance Testing: Fibonacci retracement levels frequently align with historical support or resistance zones, adding weight to trade signals. When these levels coincide with previous support or resistance, the reliability of the signal is strengthened, as it suggests that the market recognizes these zones as significant. Traders can use this confluence to make more informed decisions, especially when planning entry or exit points near established support or resistance areas.

By incorporating these patterns and monitoring their occurrence at key Fibonacci levels, traders can enhance their ability to distinguish high-probability trade setups from weaker signals, optimizing their overall trading strategy.

Practical Trading Scenarios Using Fibonacci Retracement

Understanding how to apply Fibonacci retracement in real trading situations can make this tool even more effective. Below are practical scenarios for using Fibonacci retracement in both bullish and bearish markets. These examples provide insights for planning trades at each retracement level, helping you determine ideal entry and exit points.

Bullish Trend Scenario

Imagine you’re observing a strong uptrend on your chart and want to identify points where price may pull back before resuming its upward trajectory. Here’s how you might approach this:

  1. Identify the Swing Low and Swing High: Begin by marking the most recent significant low (Swing Low) and the recent high (Swing High) of the trend. These points will act as anchors for drawing the Fibonacci retracement levels.
  2. Apply Fibonacci Retracement Levels: Use the AutoFib Tool to automatically plot the retracement levels from the Swing Low to the Swing High. Common retracement levels to watch are 38.2%, 50%, and 61.8%.
  3. Analyse Key Levels for Entries:
    • 38.2% Level: A minor pullback often signals a strong trend. Place an entry around this level if you expect the trend to resume quickly.
    • 50% Level: Consider this level if you anticipate a deeper retracement. This midpoint often signals a continuation after a moderate pullback.
    • 61.8% Level: Known as the Golden Ratio, this level may indicate a stronger reversal area and can be used for more conservative entries with a higher probability of trend continuation.
  4. Plan Exits and Stop-Loss:
    • Set a stop-loss just below the Swing Low to manage risk in case the trend reverses.
    • Set take-profit levels at new highs or additional Fibonacci extension levels (e.g., 127.2% or 161.8%) if the trend continues.

Bearish Trend Scenario

In a bearish market, Fibonacci retracement can help you identify optimal points to enter short positions during retracement phases within a downtrend. Here’s a step-by-step approach:

  1. Identify the Swing High and Swing Low: Start by marking the recent high (Swing High) and low (Swing Low) that define the downtrend.
  2. Apply Fibonacci Retracement Levels: Using the Fibonacci Draw Tool, plot Fibonacci levels from the Swing High down to the Swing Low.
  3. Analyse Key Levels for Short Entries:
    • 38.2% Level: If the trend is particularly strong, expect the price to pull back only slightly before resuming downward. This level may be a good entry point for short trades in a strong downtrend.
    • 50% Level: This level serves as a median retracement point, where traders often enter short positions during moderate retracements.
    • 61.8% Level: Known for its reliability, the Golden Ratio can signal a significant pullback before the downtrend resumes, making it a favorable entry point for a conservative short position.
  4. Plan Exits and Stop-Loss:
    • Place a stop-loss just above the Swing High to control risk.
    • Set take-profit levels at or near the previous low or further Fibonacci extension levels (e.g., 127.2% or 161.8%) if the downtrend continues.

Additional Tips

  • Combining with Other Indicators: For added confirmation, consider using RSI or Moving Averages in conjunction with Fibonacci retracement. For example, if RSI is in an overbought range near a 61.8% retracement level in a bearish trend, it may signal an ideal entry for a short position.
  • Multi-Timeframe Analysis: Check Fibonacci retracement levels on higher timeframes (e.g., H4 or D1) to confirm trends and retracement areas on lower timeframes. This approach offers a broader market context and stronger signals.

By applying Fibonacci retracement in various trading scenarios, you can strategically enter and exit trades, improving your confidence and precision in both bullish and bearish markets.