Fibonacci pivot line indicator is an intraday support and resistance level indicator which is calculated by adding subtracting the Fibonacci numbers from the pivot point.
Fibonacci numbers are a very popular tool that traders can use to draw support and resistance lines, identify reversal or trend change areas, place stop-loss, and target prices. Let’s try to understand the working of this trading system.
Fibonacci Pivot Line Indicator Overview
In this indicator, Support and resistance lines are plotted along with daily pivot points and such lines are used to identify possible reversal points in price action. The pivot point in technical analysis is used to determine a trend in price action.
It is calculated by taking the average of the high low and closing price of the previous trading day. If the price is forming a higher high and higher low pattern above the pivot then the price is in an uptrend.
If the price is forming a lower high and lower low pattern below the pivot point then the price is in a down trend.
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Fibonacci Pivot Line Indicator Explanation
In an uptrend, traders should look for long opportunities on the breakout of the Fibonacci level above the pivot point. The next level can be used to exit the trade or as a trial stop loss.
In a downtrend, traders should look for selling opportunities on the breakdown of Fibonacci levels below the pivot point. The next level can be used to exit the trade or as a trail stop loss.
Fibonacci Pivot Line: Buy Conditions
- Price should move above the pivot point.
- The higher high and higher low pattern on the charts.
- Breakout of the Fibonacci level above the pivot point is the criteria for entry.
- Traders can place a stop loss below the pivot point and target above the next Fibonacci level.
Fibonacci Pivot Line: Sell conditions
- Price should move below the pivot point.
- The lower high and lower low pattern on the charts.
- Breakout of Fibonacci level Below the pivot point is the criteria for entry.
- Traders can place a stop loss above the pivot point and target below the next Fibonacci level.
