The Fibonacci Retracement Tool: Tutorial (New Text Feature)
https://www.youtube.com/watch?v=SQ6yOtyBqxU
Transcript:
Let us show you this new capability to add text. We’re going to select Fib Retracement. Then we’re going to locate a recent high and click. Then we’re going to find the most recent low and click. And now that we have the tool selected, we can see we have it selected here. We can hover our mouse over each critical Fibonacci level and a new button appears that says add text we can then click this add text button and type in anything we wish it could be a reminder a note a trade idea anything of the sort so this for example we’ll
call this our chop zone how about at the bottom here we’re going to call this our buy the dip zone and then how about at the top here we’re going to say this will be our take profit zone and we can even add additional text as other key reminders you know such as if it breaks above this first Fibonacci extension level maybe this is the conviction zone to show that the trade is starting to work in our favor and now we have a little more conviction that this chart of Disney is turning around and maybe breaks above that first Fibonacci extension just to let
us know, hey, this might be working. So this is how you can add text to your Fibonacci retracement tools. But now it’s time to dive into the settings of this tool because we want to remind you how to use this tool and also all of the capabilities that you have.
The first thing we’re going to do is double click on the tool to open up the settings menu and remind you that you can fully customize everything on this tool. So as we zoom down or scroll down, we can see all of these features. Let’s start with the trend line. The trend line is this dotted line that goes through the chart.
Now keep in mind this trend line we drew from the recent high here to the recent low. Now this is quite important to explain and the reason why we need to explain that is because all of your Fibonacci levels, which after all is a mathematical sequence that goes back many years, is essentially being calculated based off of the high and the low. So you can look to see the Fibonacci ratio based on these two levels.
So these numbers are being calculated based off of the high and the low and then being presented to you so you know where you are in the move. So in this example, if we believe that this high to this low is going to actually turn into a bullish move, maybe there’s going to be some sort of turning event here, well, we can use these levels, these Fibonacci sequences as zones to watch as we go forth in the move. Now, that’s the first point of the Fibonacci retracement tool.
But let’s go ahead and double click again, because there’s so much more here to show you. Now, as mentioned, the high here and the low are connected by a trend line, and we can fully customize this trend line, including the color, look, and feel, just like all of the drawing tools on TradingView.
Let’s go ahead and click white. Why don’t we make this a solid white line? Because we prefer just to see that trend line going straight down. Also, next up, you’ll see these levels line here, and that is the levels that you see. And what you can do is customize the thickness of each level. So you can see these lines getting thicker.
And depending on how you want your chart to look, you can customize this to your exact needs. And if you want, you can even make dotted lines or dash lines or solid lines. We’re going to use solid lines for this example, and we’re going to make them somewhat thick here, just right here at this medium level.
And now it’s important to talk about extending your lines left or extending your lines right. Now, if you click extend lines left what you’re going to get here is the ability to zoom out on your chart to see if the levels that you’ve drawn on your chart and added notes to actually play out. This is one of the best parts about adding notes. You can now compare your notes to prior price action by extending the tool all the way across the chart and reading your notes as you go through time.
Has price actually chopped at this level? Is this actually a conviction buy zone based off of this prior trading history? Is this really a good level to buy the dip mat based on this prior trading history? So being able to add text and then extend the tool left or right is really going to help you with your research.
In fact, let’s now not extend them to the left, let’s extend them to the right. Now this is a helpful capability because you might want to map and plan out your trade ahead of time. So for example, we called this our conviction zone because if it breaks above that level, it’s the first Fibonacci target that we are breaking above.
And by extending our Fibonacci retracement lines all the way to the right with our text right here, we can compare and contrast in real time to see how it all plays out. And let’s say, of course, we are browsing through hundreds of charts per day, per week. Well, recall that we have our chart saved. This tool will be saved. This text will be saved.
So if we come back to this chart in a few days, we can have our notes right in front of us. Let’s go ahead and double click again, because it’s really important here that you understand this tool and why this text feature is so important. Before we talk about the Fibonacci levels here, because after all, that’s what these are.
These are talk about the Fibonacci levels here, because after all, that’s what these are, these are all of the Fibonacci sequences based off of the high and the low, and just by unchecking a box, we can delete or add specific levels. Let us go down here to the bottom because we wanna show you some features before we talk about the Fibonacci levels or the colors. For example, you may want to turn off the background.
Look at the difference that has made already. We turned off the background. Now it’s a crisp chart. It’s essentially just multiple lines based off the Fibonacci levels shown to us, and we can really track this a little bit easier. Also, when you have your text on the chart, you’re going to see a box that says text. Obviously if we uncheck this our text disappears. If we check it our text reappears.
Keep in mind that we can place our text wherever we wish. So if we want to move it to the left of the chart we can do just that. The best part about this process is that you will notice that the Fibonacci levels and price levels perfectly correspond with your text. Nothing changes. They’re lined up just as you would expect.
So if you want, you actually could really have some fun finding the customizations that work best for you. In this latest example, we’ve just moved our text to the middle and the Fibonacci levels and the price levels and check that out. We now have this crisp Fibonacci sequence that we can track through time. We can see our key levels and our notes.
Once we double click again and get back to the settings menu, it’s important to remind you that you also have full control over the font. So if you prefer small font, why don’t you take it down to a 10? Or if you want 12 or 14 or 16 or 20, the choice is yours. Let’s leave 20 for the remainder of this video just to make this as large as possible.
After all, one of the key points of this video is the new ability to add text to all of the Fibonacci retracements that you do indeed draw. Keep in mind that many of you may use log scale charts, which effectively turns the price scale into a percentage move price scale, not a singular point price scale. So instead of each point representing, you know, one point, one point, even separation, it’s now separated by percentage move.
Well, when you have a log scale on, and you can see that by the L, and you double click the Fibonacci tool, you can scroll down and you’re going to see that there’s a feature to have your Fib levels calculated based on log scale. This means that the Fibonacci retracement tool is going to calculate its Fibonacci levels based off the very log scale that you have to keep everything consistent.
In fact, you can see as the levels jump between either non-log scale, so unchecked, or log scale. The choice is yours. For this video, let’s just go back to a regular old chart and no Fibonacci levels based on log scale. We’re gonna double click to reopen up the Fibonacci retracement settings menu because now we need to talk about the colors and customization.
Always remember that you can customize everything on your Fibonacci retracement tool, especially the specific Fibonacci points that you want to have charted or also the colors as well. So if you prefer to have very specific colors, you can see here this conviction zone, you can go ahead and do that.
And maybe for this video, what we could demonstrate is why don’t we make the lines at the bottom green to represent sort of our trade, which is that we are starting to accumulate the position. And then everything above that start to make it sort of a reminder that, hey, we might be entering our sell zone. And so we should make it more of a red color to remind us.
So now, as you can see, the text also changes with that color change. So what we can do now is really map our trade out according to the colors that we want. So if we really think that this is the bottom here, and this was the high that we want to trade, and then we just want to trade all the sequences between these two price points, well, check it out. We’ve got our conviction zone. Then we’ve got this 0.382 level.
Then we map this yellow for chop zone. Sometimes this 0.5 zone is known as sort of a contentious level if other people are charting a similar trend and Fibonacci sequences you. And then the colors get increasingly red because we’re obviously nearing our take profit zone.
We’re also going to want to update this text, which by the way, you can click and edit the text just as such. So it’s very, very easy to customize and change as you go forward. Now, the final thing we want to end on with this tool is that when you double click it and go to the settings menu, it’s important to know that you can use this tool is that when you double click it and go to the settings menu, it’s important to know that you can use this tool for multiple different events.
So in this case, we have used the tool to measure the Fibonacci sequence from the high to the low. But if we double click, and if we scroll down, and if we access the reverse button, we can actually switch these levels. So check this out, we’re going to click reverse, it’s now been reversed. So now we’re by the dip zones up here.
Now, why would you do this? You might want to reverse this if you’re changing your trade. Maybe you flipped from bullish to bearish, or maybe you want to see how it looks in an opposite way. This is up to you. So it’s all about how you are drawing the tool and what you’re looking to get from it. There are multiple ways to draw out a Fibonacci retracement.
We only just showed you one example. We took it from the high here and went down to the low. But you could of course do other aspects too. Maybe what you want to do is measure this recent price action, measure this recent price action all the way up to this high and see where you are in the context of the move. Or perhaps this level doesn’t even matter to you.
Maybe you want to chart it from this high way up here, all the way to this low way down here, and look at the chart from this point of view. Where is the price action relative to this high and this low while looking at the Fibonacci sequences. So that is a key point to end this essentially video tutorial on, which is that you are the master of this tool.
Once you start to use it, you get to pick the high and the low, the Fibonacci sequence will be calculated in between. Then you get to add text as needed at each important level. And then you can take it from there by double clicking and entering the settings menu and making essentially infinite customizations until you’ve built the perfect chart and analysis for you utilizing the Fibonacci retracement tool.
So we appreciate you watching this video and always remember that our help center has tons of information in it and our YouTube channel also has other videos that cover the Fibonacci drawing tool and the Fibonacci retracement tool.
