Fibonacci Retracement Reversal Strategy Diagram
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The swing range of the last twenty candles is split by the golden ratio, and the two resulting retracement levels are used as reversal zones. A candle that closes on the lower level in a bullish body is bought, a candle that closes on the upper level in a bearish body is sold, and the SimpleMovingAverage decides when the trade is over.
Strategy Overview
- Highest and Lowest over the same lookback give the swing high and the swing low; their difference is the range the levels are measured in.
- The buy level sits 0.618 of the range under the swing high, the sell level 0.618 of the range above the swing low, and a candle counts as being on a level while its close is within two percent of the range of it.
- Both distances are computed relative to the range, so the diagram works the same on any instrument and any price scale.
- Entries also need a confirming candle body and a flat position; the SimpleMovingAverage handles every exit, and there is no stop or target.
Entry and Exit Rules
- Long entry: The close is within the buffer around the lower retracement level, the candle is bullish (close above open) and the position is flat. The block buys one lot and opens a long.
- Short entry: The close is within the buffer around the upper retracement level, the candle is bearish (close below open) and the position is flat. The block sells one lot and opens a short.
- Exit: A long is closed as soon as a candle closes below the SimpleMovingAverage, a short as soon as one closes above it; both exit blocks run in close-position mode, so they only fire when there is something to close.
Parameters
| Parameter | Default | Description |
|---|---|---|
| Swing lookback | 20 | Number of candles the swing high and the swing low are taken over. |
| MA period | 20 | Length of the SimpleMovingAverage the exits are measured against. |
| Fibonacci ratio | 0.618 | Retracement ratio that places both levels inside the swing range. |
| Level buffer | 0.02 | Half-width of the entry zone around a level, as a share of the swing range. |
| Volume | 1 | Order volume, in lots. |
| Candles | 00:05:00 | Candle time frame the whole diagram works on. |
Diagram Details
- One candle block feeds Highest, Lowest and the SimpleMovingAverage, plus two converters that pull the close and the open out of the candle.
- Two formula blocks turn the raw prices into the distance from the close to each level, divided by the range, so a single buffer constant serves both sides.
- Every entry passes through a logical AND of three flags: the level, the candle body and the position compared with a zero constant.
- The two exit blocks are triggered straight from the moving-average comparisons and are set to close-position mode; all four order blocks share one volume constant.
- The diagram runs on five-minute candles and can trade again as soon as its conditions return. Expect it to hold positions for a handful of bars; raising the MA period lengthens them.
Usage
Import the .json file into Designer, run it in the backtester on historical data, then adjust the parameters or the blocks themselves to fit your instrument before trading it live.