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.
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.
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.
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.
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
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
The Alchemy AutoDailyRetrace Indicator automatically
calculates the daily swings and displays the daily trend and
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.
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.
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.
of the swing and retracement points for both tools can be
determined by either moving text object labels or by entering
them through inputs.