Fibonacci retracements are quantified levels of support and resistance. The .618 Fibonacci retracement level is one of the most important levels in the sequence, and regardless of the structure of the move you are measuring, it can work very well to look at this area for potential continuation trades.
The .618 retracement level means that the move needs to pullback for 61.8%. This offers an attractive risk-to-reward play if you can get in at this level, although it might have a lower chance of succeeding because it could be argued that the move has died down if it pulls back this far.
The goal of the Fibonacci retracement is to turn a popular trading concept into a structured, testable, and automated strategy.
The most commonly used method is to identify a move (from low to high, for example), and calculate the Fibonacci ratios for this move.
Step 0: Access the Strategy Concept Template [1 Min]
Click the button to load the trading bot directly onto your canvas:
Templates are for educational purposes only.
The template is designed to run on the Daily Timeframe.
Your canvas should display these blocks. Check? Let's continue!
Step 1: Export the Trading Bot [1 Min]
Before diving into customization, export the trading bot with the upper right 'DOWNLOAD' button.
Step 2: Upload to MetaTrader 5 [4 Min]
Don’t know how? Refer to our help article How to Run Your Profectus Trading Bot in MetaTrader 5 (MT5).
Step 3: Understand the Logic [10 Min]
Initiate the variables. We start by putting the following variables in the Variables list. All are numbers and have a value of 0 by default:
High
Low
Highlow
Highlowfib
Fib
Run at time. Start the EA with a Run at time block and put the time at 02:00 to initiate the system just after market open every night.
Trade rule for checking the big body. Put a trade rule block with the following rules.
Candle body size, Candle ID 1 => Candle total size, Candle ID 1 *0.70
In this block, we check if the body size of the previous candle is bigger than 70% of the total candle size.
Modify Variables. In this modify variables block we assign the variable highto the candle high of candle ID 1 and the variable low to the candle low of candle ID 1.
Formula. Here we do the calculations to find the .618 Fibonacci retracement level. There are 2 calculations:
Highlow = high - low
Highlowfib = Highlow * 0.618
Trade rule for checking bullish or bearish candle. Here we check if the previous candle was a bullish candle. We also use the False output of the block to automatically make the sell side if it’s not a bullish candle, and thus it’s a bearish candle.
Formula to calculate the .618 fib level. There are 2 formula blocks. The true output formula block does:
Fib = High - Highlowfib
The false output formula block does:
Fib = Low + Highlowfib
Pending order blocks. The last step is placing the buy and sell pending order blocks. The orders are opened at Custom price level Fib. And the stop loss is placed at Candle low of Candle ID 1 for a buy, and at Candle high of Candle ID 1 for a sell. The take profit for both is 500% of stop loss.
This is what the strategy looks like on a chart.
Step 4: Make It Your Own [10 Min]
You can adjust and experiment:
Add more strategy rules or include the Fibonacci Retracement components in your own strategies
EXPORT and see the differences.
Play around with timeframes and assets
EXPORT and see the differences.
Refine the rules to fit your own interpretation of the Fibonacci Retracements concept
EXPORT and see the differences.
Click the button to load the trading bot directly onto your canvas:
Templates are for educational purposes only.
The template is designed to run on the Daily Timeframe.
Conclusion
The Fibonacci Retracement strategy enhances a concept that is incredibly popular among manual traders. It's mechanical and universally applicable across all markets. Now it's your turn—apply the template, tweak the logic, and make it yours. 🚀