Module 2 Technical Analysis

Chapter 16

The Fibonacci Retracements

213

M2-Ch16-title

The topic on Fibonacci retracements is quite intriguing. To fully understand and appreciate the concept of Fibonacci retracements, one must understand the Fibonacci series. The origins of the Fibonacci series can be traced back to the ancient Indian mathematic scripts, with some claims dating back to 200 BC. However, in the 12th century, Leonardo Pisano Bogollo an Italian mathematician from Pisa, known to his friends as Fibonacci discovered Fibonacci numbers.

The Fibonacci series is a sequence of numbers starting from zero arranged in such a way that the value of any number in the series is the sum of the previous two numbers.

The Fibonacci sequence is as follows:

0, 1, 1, 2, 3, 5, 8, 13, 21, 34,  55, 89, 144, 233, 377, 610…

Notice the following:
233 = 144 + 89
144 = 89 + 55
89 = 55 +34

Needless to say the series extends to infinity. There are few interesting properties of the Fibonacci series.

Divide any number in the series by the previous number; the ratio is always approximately 1.618.

For example:
610/377 = 1.618
377/233 = 1.618
233/144 = 1.618

The ratio of 1.618 is considered as the Golden Ratio, also referred to as the Phi. Fibonacci numbers have their connection to nature. The ratio can be found in human face, flower petals, animal bodies, fruits, vegetables, rock formation, galaxial formations etc. Of course let us not get into this discussion as we would be digressing from the main topic.  For those interested, I would suggest you search on the internet for golden ratio examples and you will be pleasantly surprised. Further into the ratio properties, one can find remarkable consistency when a number is in the Fibonacci series is divided by its immediate succeeding number.

For example:
89/144 = 0.618
144/233 = 0.618
377/610 = 0.618

At this stage, do bear in mind that 0.618, when expressed in percentage is 61.8%.

Similar consistency can be found when any number in the Fibonacci series is divided by a number two places higher.

For example:
13/34 = 0.382
21/55 = 0.382
34/89 = 0.382

0.382 when expressed in percentage terms is 38.2%

Also, there is consistency when a number in the Fibonacci series is divided by a number 3 place higher.

For example:
13/55 = 0.236
21/89 = 0.236
34/144 = 0.236
55/233 = 0.236

0.236 when expressed in percentage terms is 23.6%.

16.1 – Relevance to stocks markets

It is believed that the Fibonacci ratios i.e 61.8%, 38.2%, and 23.6% finds its application in stock charts. Fibonacci analysis can be applied when there is a noticeable up-move or down-move in prices.  Whenever the stock moves either upwards or downwards sharply, it usually tends to retrace back before its next move. For example if the stock has run up from Rs.50 to Rs.100, then it is likely to retrace back to probably Rs.70, before it can move Rs.120.

‘The retracement level forecast’ is a technique using which one can identify upto which level retracement can happen. These retracement levels provide a good opportunity for the traders to enter new positions in the direction of the trend.  The Fibonacci ratios i.e 61.8%, 38.2%, and 23.6% helps the trader to identify the possible extent of the retracement. The trader can use these levels to position himself for trade.

Have a look at the chart below:

M2Ch16-chart1

I’ve encircled two points on the chart, at Rs.380 where the stock started its rally and at Rs.489, where the stock prices peaked.

I would now define the move of 109 (380 – 489) as the Fibonacci upmove.  As per the Fibonacci retracement theory, after the upmove one can anticipate a correction in the stock to last up to the Fibonacci ratios. For example, the first level up to which the stock can correct could be 23.6%. If this stock continues to correct further, the trader can watch out for the 38.2% and 61.8% levels.

Notice in the example shown below, the stock has retraced up to 61.8%, which coincides with 421.9, before it resumed the rally.

M2Ch16-chart2

We can arrive at 421 by using simple math as well –

Total Fibonacci up move = 109

61.8% of Fibonacci up move = 61.8% * 109 = 67.36

Retracement @ 61.8% = 489- 67.36 = 421.6

Likewise, we can calculate for 38.2% and the other ratios. However one need not manually do this as the software will do this for us.

Here is another example where the chart has rallied from Rs.288 to Rs.338. Therefore 50 points move makes up for the Fibonacci upmove. The stock retraced back 38.2% to Rs.319 before resuming its up move.

M2Ch16-chart3

The Fibonacci retracements can also be applied to stocks that are falling, in order to identify levels upto which the stock can bounce back. In the chart below (DLF Limited), the stock started to decline from Rs.187 to Rs. 120.6 thus making 67 points as the Fibonacci down move.

M2Ch16-chart4

After the down move, the stock attempted to bounce back retracing back to Rs.162, which is the 61.8% Fibonacci retracement level.

16.2 – Fibonacci Retracement construction

As we now know Fibonacci retracements are movements in the chart that go against the trend. To use the Fibonacci retracements we should first identify the 100% Fibonacci move. The 100% move can be an upward rally or a downward rally. To mark the 100% move, we need to pick the most recent peak and trough on the chart. Once this is identified, we connect them using a Fibonacci retracement tool. This is available in most of the technical analysis software packages including scheiss-leben’s Pi 🙂

Here is a step by step guide:

Step 1) Identify the immediate peak and trough. In this case the trough is at 150 and peak is at 240. The 90 point moves make it 100%.

M2Ch16-chart5

Step 2) Select the Fibonacci retracement tool from the chart tools

M2Ch16-chart6

Step 3) Use the Fibonacci retracement tool to connect the trough and the peak.

M2Ch16-chart7

After selecting the Fibonacci retracement tool from the charts tool, the trader has to click on trough first, and without un-clicking he has to drag the line till the peak. While doing this, simultaneously the Fibonacci retracements levels starts getting plotted on the chart. However, the software completes the retracement identification process only after you finish selecting both the trough and the peak. This is how the chart looks after selecting both the points.

M2Ch16-chart8

You can now see the fibonacci retracement levels are calculated and loaded on the chart. Use this information to position yourself in the market.

16.3 – How should you use the Fibonacci retracement levels?

Think of a situation where you wanted to buy a particular stock but you have not been able to do so because of a sharp run up in the stock. In such a situation the most prudent action to take would be to wait for a retracement in the stock. Fibonacci retracement levels such as 61.8%, 38.2%, and 23.6% act as a potential level upto which a stock can correct.

By plotting the Fibonacci retracement levels the trader can identify these retracement levels, and therefore position himself for an opportunity to enter the trade. However please note like any indicator, use the Fibonacci retracement as a confirmation tool.

I would buy a stock only after it has passed the other checklist items. In other words my conviction to buy would be higher if the stock has:

  1. Formed a recognizable candlestick pattern
  2. The stoploss coincides with the S&R level
  3. Volumes are above average

Along with the above points, if the stoploss also coincides with the Fibonacci level then I know the trade setup is well aligned to all the variables and hence I would go in for a strong buy. The usage of the word ‘strong’ just indicates the level of conviction in the trade set up. The more confirming factors we use to study the trend and reversal, more robust is the signal. The same logic can also be applied for the short trade.


Key takeaways from this chapter

  1. The Fibonacci series forms the basis for Fibonacci retracement
  2. A Fibonacci series has many mathematical properties. These mathematical properties are prevalent in many aspects of nature
  3. Traders believe the Fibonacci series has its application in stock charts as it identified potential retracement levels
  4. Fibonacci retracements are levels (61.8%, 38.2%, and 23.6% ) upto which a stock can possibly retrace before it resumes the original directional move
  5. At the Fibonacci retracement level the trader can look at initiating a new trade. However, before initiating the trade other points in the checklist should also confirm.

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213 comments

  1. ashok says:

    now a days rather than fibonacci levels what i have observed is retracement of 33, 42 to 45, 52 and 65 to 68 percent range. just accidental or what i want to know. to be precise i dont have data to give but i hope ypu have them to check and reply.

  2. ashok says:

    in nest chart spot there is premarket values inclueded which distorts values. can you set right the problem so that i can give data with dates.
    for eg. on 10 nov 8264 is low but nse site gives 8304 low for that day.the reason being values of 9 to 9.15 taken

  3. Harshad Salvi says:

    It is very important that we identify the reasonable upmove or downmove. The moot question is what constitutes this reasonable / significant move? What should the bare minimum move in terms of % with respect price of the particular scrip?

    • Karthik Rangappa says:

      Are you referring to the prior trend up move or down move? If yes, I usually like to look at last 5 days trend…I consider a move over and above 5-8% as reasonable.

      • Harshad Salvi says:

        Is it fair to look at the prior up/down move of only last 5 days ? In the examples given above also it seems the prior uptrend / downtrend extending to large no. of days or even weeks for that matter.
        Also, what should be the signal that trend might get reversed? Or we must wait till we get the confirmed signal of reversal of trend?

        • Karthik Rangappa says:

          The larger the look back period, the better. However if I have to put a minimum number to it then it would be 5 days. I guess it pays off to wait for a confirmed signal which indicates the trend could be reversing.

  4. Thiyagu says:

    Is my understanding right on the below?

    You said, “For example, the first level up to which the stock can correct would be 61.8%. If this stock continues to correct further, the trader can watch out for the 38.2% level. So on and so forth.”

    In the above case, you said that the first level retracement is up to 61.8 and then look for 38.2 and so on. So, if I calculate the 38.2 and 26.3 of the Fibonacci move, obviously it will be less than 61.8. Then, how come these will be the next levels. Correct me if I am wrong.

    As I understand, the first retrace may be 23.6 and if it breaks we can wait for 38.2 and so on.

    I am trading options, can I use last 9 trading days data of nifty or bank nifty to identify the next retracements? or suggest me with suitable days. I might hold the position for 2 days to 1 week, which will be best?

    Thank you

    • Karthik Rangappa says:

      Thiyagu – You are absolutely correct, an obvious typo error. Thanks for pointing this, will make the corrections right away.
      For short term trading, I personally prefer 9 or 21 day data points.

  5. Girish Vyas says:

    Gann cycle work perfectly then why people use other failed methods . i request scheiss-leben to literate traders about Gann cycle method

  6. Harshad Salvi says:

    Can we say that more sharp/steeper the previous up/down move, the higher the likelihood of retracement being stretched towards 61.8% than say 23.6% or 38.2%?

    • Karthik Rangappa says:

      Intuitively, I would think the other way round. The sharper the move, the lesser the retracement. The reason being – people usually miss sharp moves, they would wait for retracements so that they could take positions. Hence a 23.6% or 38.2% is more likely compared to a 61.8%.But as I said, this is just intuitive 🙂

  7. Vijay says:

    FIB Retracement module is very informative.There should be module on Fib Expansions also.

  8. Thiyagu says:

    Hi Karthik,

    In the NSE website, the chart calculates the Fibonacci Retracements based on the closing prices rather than the exact high or low points. This is my observation. So my doubt is, whether we need to use the actual lows and highs or the closing prices on that day? Which is more reliable?

    Thank you,
    Regards
    Thiyagu

  9. AnilKumar says:

    How to select a low and high for fibonacci retracements? Should there be a minimum gap between low and high?
    I use KST and MACD crossovers to identify low and high? Is my method correct?
    Thanks in advance.

    • Karthik Rangappa says:

      Fibonnaci Retracemets are used to identify ans set up trades on slightly long term perspective so its always good to select the high and low from a 1 -2 or maybe upto 3 months perspective. I’m not sure if KST or MACD is really helpful in doing the same.

  10. vasanth says:

    As mentioned above 9/21 days data can be loaded to plot Fib retrace…If iam using 5Mins candlestick pattern for decision, which time period data will be the best?

  11. vasanth says:

    Sir, 9/21Mins or days?

    • Karthik Rangappa says:

      9 & 21 Mins since you would be referring to intrday charts.

      • ZQ0852 says:

        Dear sir,
        You generally refer it 9*21 min or 9*21D, why can’t you say it simply 9*21 candles irrespective of the chart/timeframe individual is using, when it is applicable to to every timeframe candlestick either it is an Intraday (5, 10, 15 min ) or day or week chart.

        Regards

  12. vasanth says:

    As suggested while using 5 mins candle stick chart, 9Mins/21Mins candle to be loaded. In the 5 mins chart how can i load the 9mins candle for plotting the fib retracement? In the uploaded chart i counted the 21candles for plotting. After the 22nd candle formation whether the retracement to be moved further after the 5min candle formation? Please clarify with example…

    • Karthik Rangappa says:

      I’m sorry there seems to be some confusion. The 9 & 21 day should be used for moving averages. For Fib ratios, just connect the recent high and low point and get the retracement. It could be done on the 5 or 15 mins chart.

  13. @Karthik,
    Which charting you were using before scheiss-leben Pi?
    Amibroker or Metastock?

  14. vasanth says:

    I am trading in Nifty index options using tech analysis like Candlesticks, fib retracement, S&R, OI change etc and it’s working fine . But while studying the 1mins chart the opportunities for trading in nifty is more compare to 5mins. As a scalper it’s the chance to trade more with min targets. Provide your comment on the usage of 1min chart particularly in nifty index options. While using 1min chart how many days i have to load to plot the fibonacci retracement?

    • Karthik Rangappa says:

      Vasanth, few things to note –

      1) Please do not use TA on Options chart. It does not work.
      2) Higher the frequency of time period better is the quality of signal. Going by that I would say 5 mins is better than 1 min….and 15 mins better than 5mins..so on and so forth
      3) Also, please do not get into scalping if you are new to markets. I would suggest you try simple day trading to get a hang.

  15. vasanth says:

    I am not using TA in CE/PE options chart. In Nifty futures contract only iam using TA and after getting confirmation, taking positions in Nifty Call/Put options.. Am i in the right path sir?

  16. Muskan says:

    I didn’t understand the last graph in para 16.2. In the graph the lines are from 100% to 0%(up to down) but shouldn’t the lines be from 0% to 100%(up to down). I mean the stock price retracing 61.8% should be lower than 38.2%. Isn’t it??
    I am confused in that.

    • Karthik Rangappa says:

      This can be a bit confusing, but let me attempt…..So if a stock has rallied from 50 to make a new high say 60 then the move from 50 to 60 is considered a fresh 100% move. A decline from 60 to say 55 is considered as a 50% erosion of this 100% move….likewise a decline to 50 from the high of 60 is considered a complete 100% erosion of the latest upmove (i.e from 50 to 60). I know it is a bit confusing but I hope this helps you clear up some doubts !

  17. Prabu says:

    Hi Karthik,
    How we can ensure that we’ve selected right peat annd low points. i tried some but when i verified with formula, i do notice there was some difference values like 0.1 to 0.5.. could you clarify this..

    • Karthik Rangappa says:

      To do this you need to refer to the recent peak and recent low, just connect the two and you should be able to see the results. Are you using Pi?

  18. Prabu says:

    Thanks Karthik. Could you explain scanner and pattern recognition options with some example. Does it apply for both intra-day & Delivery.
    Is it useful to find out past history(Like back testing) of the specified scripts or we could use these to understand current(Intra-day)/future trend of the specified scripts. Thanks again for the articles which you guys posted here…

  19. Prabu says:

    Karthik – I’m familiar with EA’s and how it gives auto buy/sell signals in Pi. Can i consider stock scanner and pattern recognition would do the same functions what EA’s do.. Thanks..

  20. Prabu says:

    Sure. I will… Thanks again for your effort..

  21. Vivek says:

    Dear Karthik
    Sorry for bugging you but I hope you understand my doubts as I am a novice.
    In the last example you gave in this chapter Step 1 is Identify the immediate peak and trough. In this case the trough is at 150 and peak is at 240.
    But I can see after the trough at 150 the immediate peak is at 187 and 221, then trough at 191, peak at 225, trough at 191 and then finally peak at 240. Marked peaks in red and troughs in blue.
    Is my judgement of peaks and troughs wrong?

    Thanks in advance

    • Karthik Rangappa says:

      Vivek – this platform is meant for sharing knowledge and asking questions, so please do not hesitate.

      Yes – your points are valid…its just that I’ve taken this for a longer period you are looking into shorter time frames.

  22. Abhilash says:

    Hi Karthik, Fibonacci Retracement is mind Blowing. Also I have checked Golden Ratio as a separate article. I was melting by Golden Ratio. The Universe and most of the things have an application of Mathematics and fibonacci calculations. Really amazing stuff because of this platform. :).

    I have a doubt on fibonacci Retracement, We need to calculate the difference between Rally started and Peak level of it to get a number to which we have to calculate 61.8% / 38.2% / 23.6 % of that value. My question is there any restriction to it, by means,
    1. Nearest Low and High difference and
    2. Around 1 month / 3 month High and Low difference

  23. Abhilash says:

    Hi Karthik, I went through few calculation y using Fibonacci Retracement. Please do have a look whether I am doing right or wrong.

    I took Union Bank Dec Future and chosen 1 DAY candle delay.

    Recent High = 185.90, Low : 156.
    185.90 – 156 = 29.9.
    then, 29.9 * ( 0.168) = 18.478. ( I took 61.8 % of the ratio).
    Add upon 156 + 18.478 = 174.478.

    174.80 was the recent high on Dec 1. Hope the calculation is right. Thanks in advance.

  24. Abhilash says:

    Not able to find indicators in both Pi and KITE.

    • Karthik Rangappa says:

      Open the chart in Kite and click on ‘Studies’ and you will get the list of indicators. There are close to 100+ indicators in Kite. There is an idicator drop down menu in Pi..quite easy to spot actually.

      • Shravan says:

        Hey Karthik

        I am also not able to find the fibonacci indicator in studies list. Could you please help us with exact name of fibonacci indication on kite platform ?

  25. Abhilash says:

    Hi, I took help from Sreenivasulu, he didn’t find Fibonacci indicator in Kite. Hope technical team has to add it…

  26. Abhilash says:

    Hi, I have got the fibonacci indicator in KITE. Thank you sir.

  27. RK kumar says:

    I have seen video in YouTube in it referring to 100, 161.8, 261.8 bounce after retracement..any relevance…any input about Eliot wave and heikinashi..Thanks

  28. K R ANAND says:

    Dear Kartik,
    Hats off to you bro for your valuable and altruistic efforts. I just wanted to request you for a bit more favour. Can you add a separate section for GANN Analysis? I am sure it will make our weapons more sharp.

  29. Sainudheen says:

    Sir, Fibonacci indicator which level can i take for 1 st target for uptrend, 61.8 % or 23.6 %, 38.2%

  30. Sainudheen says:

    Sir, your trading experience which are the indicators are best for intraday trading.

  31. Sainudheen says:

    Sir, Intraday trading, Which is the best candle to refer, 5 minutes or 10 minutes time frame candles.
    Thank you sir

    • Karthik Rangappa says:

      10 mins. Higher the time frame, the higher is the quality of information and lower the noise component.

  32. Shafeeq says:

    Hello Sir, In the last para you have mentioned that “if the stoploss also coincides with the Fibonacci level then I know the trade setup is well aligned to all the variables and hence I would go in for a strong buy”.
    My query is that, after a downtrend, when we mark the top & bottom of the trend then how can the stoploss coincide with fibonacci levels (reason being that the low of the trend forming a recognizable pattern is itself set as stop loss for the long order).
    Please correct me or guide me !!!!
    Thank You very much !!!

    • Karthik Rangappa says:

      SL coinciding simply means that the low of a pattern also coincides with the fib level…this generally gives a better confidence.

  33. Girish kumar says:

    HI KARTHIK RANGAPPA
    In intra-day 5 min time plot from 9.15 to 10.15 taking High and low of 1 hour will this be help full ?
    I am using BB and MACD on heikin ashi
    waiting for your replay …..

    • Karthik Rangappa says:

      I’m not too familiar with heikin ashi, so cant really comment. But in general 5 mins is good if you want to scalp the markets.

  34. Vijay says:

    Hello Karthik,
    I just have a question regarding Fibs so here it goes….most of the videos i have seen about Fibs are historical in nature i.e. they go back in time in order to explain how it works which is fine since they are trying to make us understand how it actually works.

    In real time,it’s a different ball game altogether,isn’t it?I mean the retracement or extension can be any percentage…..right?
    There is no guarantee it will go to a certain percentage and then go in the opposite direction depending on short,medium or
    long term.

    So,the 2nd part of my question is…..it’ll be more beneficial if Fibs is used along with other indicators so that we atleast get a better idea
    about how things are shaping up,will that be a reasonable way of looking at it?

    Regards
    Vijay

  35. bhargav kartik tunuguntla says:

    Im not able to install Pi in my mac due to some issues, what can i do? please help me

  36. Vishal Saini says:

    Karthik Sir, According to my understanding….percentage levels marked on last graph(uptrend) should be the other way i.e it should start with 0% to 100% from top.Am i correct or not?????

  37. Prathvi.R says:

    What is PayIn and PayOut Obligations? How is it charged?

  38. Dipankar Chakraborty says:

    Hi Karthik
    Can the fibonacci ratios (23.6%, 38.2% & 61.8%) be used as support and resistance levels??
    Regards
    Dipankar

  39. Rameshwar says:

    If a stock has moved 5-8% in last 5 candlesticks (5 mins per candle), Can I use Fibonacci retracements here?

  40. Priyank Saxena says:

    Some times it is seen that the candlestick on the bottom or top have a large tail, so which point we should consider candlestick body or tail, as to use Fibonacci tool or to draw trendline

  41. Raja says:

    Sir in option trading which tools are familiar

  42. raja says:

    sir, in bank nifty option trading which charts we can look

    • Karthik Rangappa says:

      Depends on your time frame, if you do intraday trades then 5 or 15 min chart is ok, else EOD for swing trading.

  43. I didn’t found fibonacci indicator in kite charts. I looked for every indicator.

  44. kaushiik says:

    when will we have fibonaccy in kite?

  45. Srinivas says:

    Dear Karthik,
    How to draw Fibonacci extentions. Thanks

  46. Vidhyapathy N S says:

    Hi,

    How I can change retracement setting values. I want to change like 0,33.33,66.66,100.

  47. Swapnil says:

    In lot of videos, they talk about 1.27 extension and others as well. 1. How to draw those and change properties of the fibonacci series? 2. There are also retracements drawn from top to bottom and then in the future as well. Can that be done in Pi/kite as well, and how?

    • Karthik Rangappa says:

      Yes, the Fib indicators are available on Kite, I’d suggest you give it a try. For general queries on chart, I’d suggest you check here –

  48. Vijay says:

    Dear Karthik,
    I am currently using the Nest trader pack that Karvy has provided me just to help me see the rates at a quicker pace,i’m new to stocks and just started to know various aspects in tech. analysis and i have one question that’s bothering me immensely which i hope
    you can provide some valuable insight on,so here it goes –

    I have observed that different people draw the fibs in two distinct ways,some draw it from top to bottom while some do it from bottom to top and that’s pretty easy to spot as well because once they finish drawing it,in some charts the fib percentage looks like 38.2,50.0 and 61.8 while in some it’s like the total opposite.

    Just to be even more sure,i looked at the trend to the left of the screen as well to make sure the trend is the same irrespective of the examples i have gone through so let’s say,the trend was down and the fib retracement tool was used…..in some charts the fib percentage levels were contrasting in nature.Some had 38-50-61 while some had 61-50-38.Please help me out on this as i don’t want my
    initial learning to go wrong.

    Cheers.

    • Karthik Rangappa says:

      Hi Vijay….the way you draw the fib retracement really depends on what you expect. If you expect the market to re trace after an up trend therefore looking for a buying opportunity, then you would draw it from bottom to top. Likewise, if you expect the market to re trace after a down move, therefore looking for a shorting opportunity, then you would draw it from top to bottom.

      Remember, retarce here means, the price moves in the opposite direction of the trend.

    • Radhika Mehta says:

      Very good question. Had same doubt. Thanks got cleared:)

  49. Deepak Goyal RD2640 says:

    Dear Karthik, a very basic suggestion if possible, while reading The Varsity chapters, user is not able to see the main content on full screen as a locked grey area is always remain visible on the top of the screen containing links such as “about, login, register etc.”. As the main content of reading also include charts etc. it is best to see the full screen to make most out of it.

    If possible, make the grey area visible or invisible depending upon the user’s choice by giving a push up arrow there similar like you have provided a push down button with Modules tab on the top of the screen.

    Thanks

  50. Deepak Goyal RD2640 says:

    Dear Karthik,

    Shall we use FIB studies only for finding a suitable time for entering in the trend or we can try for making something in the retracement itself. For example: Attached chart is of Axis Bank, down trend is almost of 191 points (from 7th Sep till 7th Dec).

    Now FIB chart shows retracement upto 521 (38.2%) and 566 (61.8%). Shall we use these points as an additional confirmation for buying opportunity if all other pre-requisites (volume, s&r and pattern with indicator) are available.

    • Karthik Rangappa says:

      FIB should ideally be used to identify entry points in the direction of primary trend. I would hesitate to initiate trades in the direction of the retracement.

  51. Deepak Goyal RD2640 says:

    Ok Thanks

  52. Ganesh says:

    If we select pivot points indicator and further select the type as Fibonacci, the lines are automatically constructed. Are these lines drawn in conjecture with the logic of drawing fibonacci lines i.e. does the indicator automatically plot lines based on highs and lows?

    • Karthik Rangappa says:

      Yes, on a stand alone basis, fib plots these lines based on highs and lows. However, I cant seem to understand the role of pivot points here.

      • Ganesh says:

        I mentioned Pivot points as the Fibonacci lines are plotted only by selecting “Pivot Points” in the “Studies” section. Additionally, since these Fibonacci lines are not showing the ratios, it becomes slightly confusing to understand if these lines are plotted correctly.

  53. santhosh says:

    how to draw fibonocci extennsion in pi?..iam unable to find the tool..

  54. Vasanth says:

    Compare to Fibonacci retracement is it better to use support & resistance? Pls suggest.Else Fibonacci can give any additional information for better results. After checking iam not getting such information.

  55. Vasanth says:

    The same for macd with sma’s.
    Moving averages are providing more useful information as compare to macd.

  56. AMIT KUMAR PANDEY says:

    1)sir, if there is gap up opening, forming 2-3 long bullish candle and after that the stock started to retrace ; In this situation which low point should i take for drawing Fibonacci Retracement Either the Low of gapup candle (OR) the low of the candle which is below the gap?
    2)can we still draw Fibonnacci if there is no lower shadow?

  57. Vivek says:

    hi,

    Do you have any plan to include fibonacci extension tool in scheiss-leben pi software soon?

  58. Ajmal says:

    HI,

    Over what time period does the Fibonacci retracement add the best value based on your experience? A stock may go up over a period and fade back over the next couple of days.. In this case does this indicator add value or is this good only for intra day parabolic peak up or peak down?

    I really appreciate your response.

    Thanks,
    Ajmal

  59. pushkar says:

    the price going below 61.8% and might get to 100%, look the chart at https://ibb.co/bCK5Vk . at 61.8% a bullish harami pattern is formed with volumes crossing slightly the average volume of last 10 days but still why the price declined ? was it because day after pattern the earnings were declared and were not as per expectation. the chart is for infosys.

    • Karthik Rangappa says:

      Well, patterns can fail. Please remember, CS pattern does not guarantees an outcome. It only enhances the probability of an expected outcome. Also, when you have fundamental news in the corner, please do not consider any CS patterns, however attractive it may look.

  60. Sumit Bhardwaj says:

    Hey, I can’t find this chart in kite? it was there earlier, but since couple of days back when the UI was changed, I am unable to find this chart.

    • Karthik Rangappa says:

      I think you should tune into the webinar Nithin is conducting today. He will help you understand whats new in Kite charts. Keep a look out here –

  61. Rajiv says:

    Hi Sir, I am unable to find the Fibonacci retracement on KITE studies. Please advice. Does it exist under a different name or is there any other setting change needed for it to appear under studies in KITE. Thank you.

  62. Ujjwal Dutta says:

    Fibonacci Retracement tool is not present in Kite at the moment. Could you please add the functionality in Kite. The tool is very helpful and I remembered using it in the old version of Kite.

  63. Suraj says:

    Hi,

    Can you please share link of any video that has been created to explain the Febonacci tool on scheiss-leben kite and PI. How to draw it and how to follow the steps while trading using it. I am active scheiss-leben user but I always have a challenge in placing the febonacci tool and looking referring it while trading on Kite. Please help me with it. I have searched on scheiss-leben channel on youtube but I never find any video for febonacci tool.

  64. Gaurav T says:

    Thanks for the explanation. I didn’t find Fibonacci in scheiss-leben Kite. Is it available only in Pi?

  65. Manas says:

    Respected Sir, I am a small Intraday trader & having almost less knowledge in trade, but this above mentioned suggestion is really useful & effective for me, Sir I only trade in Crude-oil, so before doing any assumption as per Fibonacci calculation how can i identify the trend in Intraday, whether it would go upside or down-worth…Sir, if you kindly help me on this by giving your valuable suggestion…I’ll be grateful to you..Thanks

    • Karthik Rangappa says:

      If you are new, I’d suggest you take this one step at a time, Manas. I’d suggest you do small EQ trade before taking up leveraged products.

      • Manas says:

        thanks for your valuable suggestion sir, but in equity also how can i determine the trend…if you kindly help on this…that will be very much helpfull for me…thank you sir

  66. Radhika Mehta says:

    scheiss-leben site explains all the concepts very nicely and in a simple language. I am referring the material for Technical analysis. Most of my doubts hv got cleared. Thankyou for putting in so much efforts. God bless you.

  67. Raghunath says:

    Hi Karthik,

    Thanks for sharing this topic, as you may aware of that Elliott wave theory and Fibonacci retracement are co-related to each other and I am not an expert in Elliott wave but I am still learning, so my concern here is, the Fibonacci tool which is available in the Kite does not suffice or partially suffice the purpose of Fibonnaci retracement . In Elliott wave and Fibonacci there are three aspect of retracement 1) Reracement measuring high low point. 2) extension of retracements. 3) Projection of retracement. In Kite there is no option for Fibonacci projections which is measure draw back.

    Note : Fibonacci projection is based on A – B – C price movement, for an example 0 -A is the first price movement, and it will retrace to B point (opposite direction), after retracement we can project the next price movement from end of B, measuring how much wave C will retrace like 127%, 161%….of wave A or you can visit this link http://chart-formations.com/fibonacci/projections.aspx

    If you could bounce it off this to your technical team and make them to understand the importance of Fibonacci Projection that would be great.

    Thank you,
    Raghunath

    • Karthik Rangappa says:

      Raghunath, sure I can. However, I’m not sure if they would be of any help. We use a 3rd party charting engine and this is really upto them to modify the indicators. Let see what best we can do about this. Thanks.

  68. Gautam Netalkar says:

    Hello Team,

    Can you please let me know how to apply Fibonacci retracement in Kite (desktop browser) ?

    Regards,
    Gautam

    • Karthik Rangappa says:

      I’d suggest you attend one of our online demos here – , subscribe to the channel and you will get a live notification when the demo is on. We conduct the demo twice a day.

  69. Pawan Kumar Singh says:

    Karthik sir could you please explain only 1 intraday setup for nifty which have good accuracy.

  70. shantanu says:

    Hi Karthik,

    Earlier you had mentioned that you will bring out a module on ‘Trading Strategies and Systems’. I was awaiting for it but I cant find the link for it anymore. Please help.

    Thanks
    Shantanu

  71. sarup Sagar says:

    Do we have Fibonacci retracement drawing tool in kite??

  72. venu says:

    Hi

    Can we use Fibonacci for intraday or equity futures

    If yes
    Intraday : How many days should i consider? candle stick should be in hours or mins or days
    equity futures: How may days should i consider ? candle stick should be in days or hours

  73. kunal says:

    how to calculate EMA and standard deviation

  74. Gurpreet says:

    Hi Karthik,

    What is the most suitable time frame between a low and peak for fibonacci charts for medium to long term investments? If the low is formed, in say, December 2016 and the peak is in April 2017, is this period long enough to form a meaningful fibonnaci charts? Say, another peak is formed in August 2017 which is higher than that in April 2017, will the charts now be created for the period from December 2016 to August 2017? Till what period will the low of December 2016 be used for creating the fibonnaci charts?
    Thanks.

    • Karthik Rangappa says:

      It should ideally be separated by at least 10-12 trading sessions for short trading frequencies…for slightly longer term, I’d suggest at least 20+ trading sessions.

  75. Swapnil says:

    Will it be possible for your team to include the 127% Fibonacci retracement level in Kite and Pi?

  76. Amit Kapoor says:

    Hi,

    I have a question on drawing the Fib retracement line. If after drawing the line if a new low or high happens should the line be extended to that new low or high

  77. Alnoor Surani says:

    Hi, is there a way to change the fibonacci settings in pi ?

  78. Sarthak Laddha says:

    How to view fibonacci retracement in kite mobile app… Since i didn’t find fibonacci retracement? And how to view S&R?… In pivot function i find S&R, but in stocks like saregama and titan etc S1 is showing in 600 levels… R1 & R2 below the current market price and R3 is above CMP… How is this possible?

    • On Kite Mobile App, in the Chart screen, click on Settings>Draw. Under Select Tool drop-down, you will find Fibonacci retracements.
      Support and Resistance levels vary based on the time-frame of your chart. I’m assuming you chose a longer time-frame(Daily or Weekly), since your seeing 600 as support for Titan. A smaller time-frame will have updated S&R levels
      Pivot points are static lines calculated on the values of the previous period(35 candles), they don’t change with the market price. If the LTP is higher than R1 and R2, it means that the scrip has broken resistance twice in this period and S&R levels will reflect in the next period

  79. santosh patidar says:

    Please explain how to set target price with Fibonacci, I have seen some people give target price even for newly listed companies like DMart. They give long term target. Target in charts where price is at all time high and also for other.

    • Karthik Rangappa says:

      From my experience, Fib retracements are best for identifying retracement levels – you can use the same to identify targets by looking at the ratios. I’ve explained this in the chapter.

  80. SHRIKANT says:

    1.Which one of these do consider more sacred, manually drawn S/R levels OR Formula generated Pivot Levels…?
    2. When we enable Pivot points in Kite, previous days levels are also visible, so suppose Yesterday’s R1 falls between Today’s Pivot and R1, can I consider that as a halfway take profit level and trail with remaining till Today’s R1(if the trend is up) ?
    3.For that matter if we zoom out any chart,many days/minutes/hours/weeks/months of Pivot points are visible, how far back can we consider the levels as our targets/stops ?
    4. How do the Pivots differ on a daily and on all the shorter TF’s…. Means will the Pivots levels be different on a 30 min chart and a 5 min Chart ?
    Thanks…

    • Karthik Rangappa says:

      1) I prefer the manual S&R
      2) This is exactly the reason, I’m not too fond of Pivot Levels. It’s a little too fickle for my liking
      3) This depends upon your risk appetite
      4) Yes, this is possible. In fact, this happens for manual S&R as well.

  81. chidambaram says:

    Hi Sir,
    I have many doubts to be clarified. Kindly help on it.Sorry for the trouble… 🙁
    1.Is that in Bollinger band can we use 20 EMA instead of SMA?
    2.Is that every stock which rallied up will definitely have a FIB retracement?Is it sure or a possibility?
    3.Is secondary trend in Dow theory and FIB retracement are same concept?are they inter linked?
    4.How to indentify the peak and trough exactly?As in your FIB retracement example there are several peak before 240.Why din’t you consider them ?How have mentioned in the chapter to consider the previous peak and trough,if so the previous peak is 240 in the example then i could see that the immediate trough is not 150 and it is something higher than 150.Why is that not considered?
    5.In examples given here the stock have also retraced bit higher than the FIB %. Is this mean that its approximate % range?If so can the stock retrace even to 55 % or 65%?If so are they still considered FIB retracement?
    6.Is the Initital movement need to be more steep for FIB retracement to happen? What if the momentum of the up move is very slow (say 2/3 years with 25 to 30 % price change) will the FIB retracement will happen for that to?
    7.what is max time that a stock take to retrace?
    8.How much the stock could bounce back after retracement? any % value is there?After bounce back will there be a retracement again?
    9.When a Support or Resistance is a range instead a particular price value, then what if the Candlestick pattern form at the lowest of the range,should our target be the upper portion of the range?if so then the price difference wont be very less ?
    10.If a trade work in our favor, how to identify will the price move has a potential to break first Resistance and reach second resistance?Because I usually close position at first resistance but prices move till to next resistance and I miss them? 🙁
    11.In intraday trading, how to close the position(in 15 min chart based trading).what i mean to ask is if the CMP reach SL(lowest of the candlestick pattern), should the trade be closed immediately?or should i wait to check whether that particular candle close below SL?If the price tough SL but that 15 min candle closes above SL can i continue with the trade?
    Again a Sorry for the too many questions… 🙁

    • Karthik Rangappa says:

      1) Yes, you can change this to 20 EMA
      2) It just a possibility
      3) No, they are two different, although you can combine the two
      4) Look for the most recent highest peak and lowest trough – this will help you draw good fib levels
      5) Everything around TA is approximations
      6) No, nothing like this
      7) This can pan across month, hard to put timelines
      8) No guarantees here, but some traders expect at least a 50% move up from the time it starts to bounce
      9) In fact, S&R is always a range and not really a specific price point. Yes, you can do this – essentially trade the range
      10) Track the momentum and volumes, if both are supportive, then you can expect the target to reach R2. Otherwise, you can simply trail your SL and stay in the trade
      11) Its best to close the position as soon as your target hits, this is especially true in intraday trading.

      Good luck.

      • chidambaram says:

        Hi Sir,
        1. My Doubt was,how should a intraday trader need to close his position, when the STOPLOSS is hit and not on TARGET hit?should the trade be closed immediately as soon as SL is hit?or should i wait to check whether that particular candle close below SL?If the price tough SL but that 15 min candle closes above SL can i continue with the trade?
        2.Also can you explain how to check whether there is a possibility of bollinger band expansion or not?
        3.How to place a trailing stop loss? what are the rules(math calculation) behind it with respect to target?-(please explain in detail)
        4.If there is a small difference between the SL(low of the candlestick pattern) and Support, then on breaching of which value should the trade be closed?(explan it for both intraday and swing trading)
        5.if the close and high difference is 0.5% and low=open, can it be considered as marubozu?

  82. Jawahar says:

    Hello Sir,

    In intraday trading, how do we differentiate between retracements and reversals. I had losses because i thought it would reverse but then it was retracements.

    Thanks and Regards,
    Aishwarya

  83. Himanshu modi says:

    Hi karthik sir
    What’s your view on ichimoku kinko hyo??

    Is it worthy to learn it?

    • Karthik Rangappa says:

      I’ve not used it much and know very little about it, hence my opinion would not matter 🙂

      Yes, go ahead and learn it. Nothing wrong with knowledge gained 🙂

  84. Shubhang Singhal says:

    Sir,
    If after identifying the 100% up move in a stock the stock has fallen till 61.8% level, to further predict any correction do we have to identify a new move or continue with the earlier identified up move?

    • Karthik Rangappa says:

      Usually, you connect highest high and lowest low to get the fib levels. So you always keep these extreme values in perspective while looking at fib ratios. Once the price moves away from this zone, you look for newer high and low points. So given this, I’d suggest you stick with the same points, until the stock has moved significantly away from these points.

  85. sourav says:

    Sir, for the first 5 Fibonacci series i.. 0,1,1,2,3 if we divide any number in the series by the previous number; the ratio is not approximately 1.618. Example 2 divide 1 is 2. Why?

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