This numerical relationship is named for its discoverer, Leonardo Fibonacci, who was an important mathematician born in Italy around the year 1170. It is rumored that Fibonacci found this relationship while studying the Great Pyramid of Giza in Egypt.

There are four Fibonacci Studies used to analyze chart patterns: Arcs, Fans, Retracements, and Time Zones. The general interpretation of the Fibonacci Studies involves the anticipation of a change in trend as prices near the lines created by the studies.

We will be using MetaTrader 3.83 for our charting purpose.

Fibonacci Retracements:
Fibonacci Retracements are constructed by first drawing a trendline between two extreme points; for example, a trough and the opposing peak. A series of nine horizontal retracement lines are then drawn intersecting the
trendline at the Fibonacci levels of 0.0%, 23.6%, 38.2%, 50%, 61.8%, 100%, 161.8%, 261.8%, and 423.6%.
The values are percentages of the total length of the trendline. Obviously, values greater than 100% will fall below
(or above) the starting point of the trendline. Some of the lines will probably not be visible because they will be
off the scale.

After a significant price move (either up or down), prices will often retrace a significant portion (if not all) of the
original move. As prices retrace, support and resistance levels often occur at or near the Fibonacci
Retracement levels. In the chart below, Fibonacci Retracement lines were drawn between a major trough and
peak.

You can see that support and resistance occurred near the Fibonacci levels of 23% and 38%.

How to draw Fibonacci Retracement lines on a chart:

• 1. Open a chart you want to analyze
• From the 'Line Studies Button Bar' or 'Insert Menu' click on Fibonacci Retracement. The arrow cursor wil change to the Fibonacci Retracement drawing cursor.
• Place the cursor at the point on the price chart where you would like the retracement trendline to begin and press the left mouse button.While continuing to hold down the button, move the cursor to the point where you want the trendline to end
• When you release the mouse button, a trendline will be drawn between the two points and the Fibonacci
• Retracement lines (shown as horizontal dashed lines) will be automatically drawn based on the length and position of the trendline.
• To remove the Fibonacci Arc press the 'Backspace' button on your key board.

Fibonacci Arcs:

Fibonacci Arcs are constructed by first drawing a trendline between two extreme points on a chart; for example, a trough and the opposing peak. Three arcs are then drawn, centered about the second extreme point. The radiuses of these arcs represent distances along the trendline proportional to its length and are equivalent to the Fibonacci levels of 38.2%, 50.0%, and 61.8%.

The interpretation of Fibonacci Arcs involves anticipating support and resistance as prices approach the arcs. The chart on the preceding page illustrates how the arcs can provide support and resistance. A common technique is to display both Fibonacci Arcs and Fibonacci Fan lines and to anticipate support/resistance at the points where the Fibonacci Studies intersect. Note that, because the Arcs are drawn so they are circular relative to the chart axis, the points where the Arcs cross the price data will vary depending on the scaling of the chart.

How to draw a Fibonacci Arc on a chart:

• Open a chart you want to analyze.
• From the 'Line Studies Button Bar' or 'Insert Menu' click on Fibonacci Arcs. The arrow cursor will change to the Fibonacci Arcs drawing cursor
• Place the cursor at the point on the price chart where you would like the trendline to begin and press the left mouse button.
• While continuing to hold down the button, move the cursor to the point where you want the trendline to end.
• When you release the mouse button, the Fibonacci Arc study will be automatically drawn.
• To remove the Fibonacci Arc press the 'Backspace' button on your key board.

Fibonacci Fans

Fibonacci Fans are displayed by drawing a trendline between two extreme points; for example, a trough and the opposing peak. Then an “invisible” vertical line is drawn through the second extreme point. Three trendlines are then drawn from the first extreme point so they pass through the invisible vertical line at the Fibonacci levels of
38.2%, 50.0%, and 61.8%. (This technique is similar to Speed Resistance Lines.) The chart below shows how prices find support at the Fan lines.


How to draw Fibonacci Fan lines on a chart:

• Display a chart of the ticker you want to analyze.
• From the Draw sub-menu select Fibonacci Fans, or click the Fibonacci Fans toolbar button. The arrow cursor will change to the Fibonacci Fans drawing cursor
• Place the cursor at the point on the price chart where you would like the trendline to begin and press the left mouse button.
• While continuing to hold down the mouse button, move the cursor to the point that you want the trendline to end.
• When you release the mouse button, a trendline will be drawn between the two points and three Fibonacci Fan lines (shown as dashed lines) will be automatically drawn below the trendline.
• To cancel the Fibonacci Fans drawing cursor and return to the normal arrow cursor, press the Arrow on the toolbar (to the left of the Trendlines toolbar button).