Fibonacci Channel

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What is Fibonacci Channel?

Fibonacci Channel is a tool of technical analysis used to determine support and resistance levels based on the Fibonacci numbers. It is a variation of Fibonacci Retracement lines, and is drawn diagonally rather than horizontally.

Drawing Fibonacci Channel

To draw a Fibonacci channel, you should draw the first base channel.

  1. Draw the first line of the base channel depending on the market trend:
    • If the trend is up, draw the trend line between two major peaks upward.
    • If the trend is down, draw the trend line between two major troughs downward.
  2. Then draw the second line of the base channel. It will be a parallel line through a point which is the most distant from the first line.
Fib Chan 1 1.png

The base channel line width is taken as one. Then parallel lines are drawn above or below this line at key Fibonacci levels of 23.6%, 38.2%, 50% and 61.8% of the original base channel width (done automatically by the trading system). Traders can also extend the levels to beyond 100% (161.8%, 200%, 261.8%, etc) if there is significant trends.

Trading with Fibonacci Channel

Fibonacci channel should be used in a trending market. It can be applied to both long-term and short-term trends, and to up trends and down trends.

Just like Fibonacci Retracement Fibonacci channel is a good tool for determining support and resistance levels. When one line is crossed in an uptrend it becomes support and above line becomes resistance. Similarly when one diagonal channel line is crossed in a downtrend it becomes resistance and below line becomes support. Most traders use Fibonacci channels with Fibonacci retracement and the price levels.

The support and resistance levels can be used for determining buy and sell points. The idea is to go long (buy) on uptrend when the price reaches Fibonacci support level and then pulls back, and to go short (or sell) on downtrend when the price reaches Fibonacci resistance level and then pulls back.

Fibo Channel 2.png
Fibo Channel 3.png

Using with Marketscope

You can draw a Fibonacci channel in Marketscope.

To draw a Fibonacci channel:

  1. Select the Fibonacci Channel tool. For this, on the toolbar, click the Add Fibonacci arrow, and then click Add Fibonacci Channel:

Then in the appeared menu choose the appropriate mode in which the tool should be drawn:

    • Snap to Nearest - in this mode the points of tools are automatically snapped to the nearest of the prices: High, Low or Close.
    • Freehand - in this mode you can draw the tool anywhere in the chart regardless of the chart prices.
    • High/Low - in this mode the points of tools are automatically snapped to High or Low prices.
    • Close - in this mode the points of tools are automatically snapped to Close prices.
Fibo Channel 4.png
  1. Click the first point for drawing the base channel. Then click the second point for drawing the base channel. This line will be taken as a base for drawing Fibonacci channel levels.
  2. Click the third point for drawing the second line of the base channel.

The points will be automatically adjusted according to the selected drawing mode if necessary.

  1. The Add Fibonacci Channel dialog box will appear.
Fibo Channel 5.png
  1. On the Levels tab, you can choose which Fibonacci channel levels will be drawn. By default, Marketscope draws levels 0.382, 0.500 and 0.618. You can select additional levels from the available set or add a new level by clicking the Add button. On this tab, you can also set the levels color and style and select the check box to draw the levels in the background under the prices.
  2. On the Parameters tab, you can choose whether the levels start and end should be extended. You can also set the name for the Fibonacci channel and the parameters related to the Fibonacci channel label and legend.
Fibo Channel 6.png
  1. On the Position tab, you can set the base channel position.
Fibo Channel 7.png
  1. After configuring all parameters, click OK. The Fibonacci channel will be drawn on your chart.

To change the properties of a Fibonacci channel, do one of the following:

  • Double-click any line of the Fibonacci channel.
  • Right-click any line of the Fibonacci channel, and then click Change 'Fibonacci Channel Name', where Fibonacci Channel Name is the name of the Fibonacci channel.

You will see the Fibonacci Channel Properties. Make the necessary changes, and then click OK.

Note that to apply the changed properties (except the name) to all further Fibonacci channel by default, click Set as Default in the dialog.

To resize a Fibonacci channel:

  1. Click the Fibonacci channel. The trend line will become thicker and three points of the base channel will appear on it.
  2. Drag the third one point of the base channel (which is on the second line) to the necessary places on the chart.

To move a Fibonacci channel:

  • Drag the Fibonacci channel lines to the necessary place on the chart.

To remove a Fibonacci channel, do one of the following:

  • Right-click any line of the Fibonacci channel, and then click Remove 'Fibonacci Channel Name', where

Fibonacci Channel Name is the name of the Fibonacci channel.

  • Click any line of the Fibonacci channel, and then press DELETE.

See also

Fibonacci Tools

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