Similar to support and resistance, trendlines and other technical analysis tools, the Fibonacci indicator is a self-fulfilling tool that often works because of its popularity.
The Fibonacci can be an extremely powerful tool when used correctly and in the best places.
Having a Fibonacci indicator on your MT4 or MT5 charts that is automatically plotted as price is continually moving can be incredibly handy and that is what we look at in this post.
What is Fibonacci Retracement Trading
Fibonacci is a very popular series of mathematical numbers.
The Fibonacci sequence is; 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.
There is also what people refer to as the “Golden Ratio” which is 1.618, or its inverse 0.618.
The 0.618 is a very commonly used level in trading as well as the non-Fibonacci level the 50% retrace.
In this post we are going to look at what exactly the Fibonacci indicator is, how you can trade with it and how you can use an auto fibo retracement indicator on your MT4 and MT5 charts.
How to Use Auto Fibonacci Indicator to Find Trades
As traders we are constantly on the lookout for quality trading opportunities.
It can be hard enough to just find high quality trades. That is even before having to manually add indicators, trendlines, support and resistance levels and use candlesticks on every chart.
Similar to other indicators discussed on this blog that will save you time when hunting for trades such as the pin bar indicator or the 123 pattern indicator, the Auto Fibo Retracement Indicator finds and plots the Fibonacci on your chart for you.
The cool thing about having an indicator that automatically plots the Fibonacci levels for you is that you don’t have to ‘eyeball’ every chart to see if there could be a possible Fibo level. You will have it all pre-marked for you.
When using the Fibo indicator for retracement trading we are looking for price to retrace into one of the important levels and then watching to buy or sell.
The Fibonacci indicator is often used with other technical analysis and indicators to give better confirmation and higher quality trades.
An example of this is on the chart above; the Fibonacci 0.618 levels also lines up with the important support level and is a potential area to watch for long trades.
Auto Fibo Retracement Indicator MT4
NOTE: If you do not yet have the correct charts to use with these indicators, make sure you read about the best trading charts and the broker to use these indicators with here.
This free MT4 auto fibo retracement indicator is by Tonny Obare at MQL5.
Whilst this is a free indicator it is very easy to use and comes with a range of options.
You have the option to choose how many candles or time periods you wish to have the Fibonacci drawn over. Once this is selected the Fibo tool will automatically be drawn on your charts.
Another nice feature is that the indicator continually updates in real-time as the highs and lows are being created.
You can read about and download the MT4 Auto Fibo Indicator Here
Auto Fibo Retracement Indicator MT5
This is an MT5 indicator from MQL5 that is by the same creator of the MT4 version.
It has all of the same settings and options of the MT4 version and has the following options that you can set to your choosing;
- Bars To Scan: How many time periods the Fibonacci should use to be created.
- Level_1: Fibonacci level 1
- Level_2: Fibonacci level 2
- Level_3: Fibonacci level 3
- Level_4: Fibonacci level 4
- Level_5: Fibonacci level 5
- Level_6: Fibonacci level 6
- Levels Color: Customize colors for different Fibonacci levels.
- Fibo Name: You can attach multiple Fibonacci’s to one chart and give each their own name.
You can read about and download the MT5 Auto Fibo Indicator Here
NOTE: Need to learn how to download and install MT4 / MT5 indicators? Read the quick tutorial here; How to Download, Install and Use MT4 and MT5 Indicators
Once mastered the Fibonacci indicator can be a very useful tool that will add to your technical analysis.
Most traders find using the Fibo with other indicators and technical analysis will provide for higher quality trades and better confirmation. This could be using the MACD, moving averages, trendlines and other strategies such as the pin bar reversal.
Lastly, always make sure to test all new strategies on good demo charts before ever risking real money.