Fibonacci Retracement and Target Levels with Buy/Sell Signals

·

Fibonacci retracement and extension levels are among the most widely used tools in technical analysis, helping traders identify potential reversal points, support and resistance zones, and profit targets. This advanced indicator enhances the traditional Fibonacci tool by integrating clear BUY and SELL signal annotations directly on the price chart, making trade entries and exits more intuitive and visually accessible.

Built for platforms like TradingView, this script dynamically calculates key Fibonacci levels based on the highest high and lowest low detected in the price data. It then plots retracement levels (0%, 23.6%, 38.2%, 50%, 61.8%, and 100%) as well as extension targets (161.8%, 261.8%, and 423.6%) using bold, color-coded lines for improved visibility.

How the Indicator Works

The logic behind this indicator is rooted in both Fibonacci mathematics and practical trading needs. The script begins by identifying the highest and lowest price points observed so far:

var float high_price = na
var float low_price = na

if (na(high_price) or high > high_price)
    high_price := high

if (na(low_price) or low < low_price)
    low_price := low

This ensures that the Fibonacci levels are anchored to real market extremes, adapting as new price data comes in.

👉 Discover how Fibonacci levels can improve your trading strategy today.

Calculating Fibonacci Levels

Once the range is established, the script computes retracement and extension levels using standard Fibonacci ratios:

These levels are plotted using thick, solid lines with distinct colors:

This visual hierarchy allows traders to quickly assess where price stands relative to key Fibonacci zones.

Visual Buy and Sell Signals

One of the most powerful enhancements in this version is the integration of BUY and SELL text labels directly on the chart.

Signal Logic

These conditions are designed to catch high-probability turning points near key Fibonacci zones — areas where institutional traders often place orders.

Signal Display

Using Pine Script’s plotshape() function, the indicator places:

This placement follows standard charting conventions, making signals easy to interpret at a glance.

plotshape(series=buy_signal, location=location.belowbar, color=color.green, style=shape.labelup, title="Buy Signal", text="BUY")
plotshape(series=sell_signal, location=location.abovebar, color=color.red, style=shape.labeldown, title="Sell Signal", text="SELL")

Core Keywords and SEO Optimization

To align with search intent and enhance discoverability, the following core keywords have been naturally integrated throughout:

These terms reflect common queries from retail and intermediate traders looking to automate or refine their use of Fibonacci-based strategies.

👉 See how professional traders use Fibonacci tools to time entries with precision.

Practical Use Cases

Trend Pullback Trading

In an uptrend, price often pulls back to key Fibonacci levels before resuming upward movement. Traders can watch for a BUY signal near the 38.2%-50% zone as a potential re-entry point, with take-profit targets set at 161.8% or higher.

Reversal Confirmation

A confirmed SELL signal above the 61.8% level during a downtrend may indicate that bears are regaining control after a weak correction. This can be combined with candlestick patterns or volume analysis for stronger confluence.

Risk Management

Traders can place stop-loss orders just beyond the 100% retracement level (for longs) or below the recent swing high (for shorts), ensuring favorable risk-to-reward ratios when acting on these signals.

Frequently Asked Questions (FAQ)

What are Fibonacci retracement levels?

Fibonacci retracement levels are horizontal lines that indicate where potential support and resistance may occur based on prior price moves. Common levels include 23.6%, 38.2%, 50%, and 61.8%.

How do I interpret the BUY and SELL signals?

A BUY signal appears when price approaches the upper end of a bullish retracement (near 23.6%-38.2%), suggesting a possible bounce. A SELL signal indicates potential downside continuation when price rejects above the 61.8% level.

Can this indicator be used in ranging markets?

Yes, but caution is advised. In sideways markets, multiple false signals may occur. It's best used in conjunction with trend filters or momentum indicators like RSI or MACD.

Are the Fibonacci extension levels reliable for profit targets?

Yes — extension levels such as 161.8% and 261.8% frequently align with where trends exhaust or pause. They serve as excellent zones for scaling out of positions or trailing stops.

Does this script auto-update with new price swings?

The current version tracks the highest high and lowest low dynamically but does not reset after a new swing is confirmed. For more advanced swing detection, consider pairing it with pivot point logic or zig-zag indicators.

Is this suitable for all timeframes?

Absolutely. Whether you're trading on 5-minute charts or weekly timeframes, the mathematical consistency of Fibonacci ratios makes them scalable across durations.

Final Thoughts

This enhanced Fibonacci indicator bridges the gap between classical technical analysis and modern visual clarity. By combining precise level plotting with actionable BUY and SELL signals, it empowers traders to make faster, more informed decisions without cluttering the chart.

Whether you're a swing trader hunting reversals or a trend follower aiming for extended moves, integrating Fibonacci-based signals into your strategy can significantly boost consistency and confidence.

👉 Start applying Fibonacci-based strategies on a trusted trading platform now.