Fibonacci Price Retracement Calculator Drawing Object
Fibonacci Price Retracement Calculator (Percent Retracement) is an analytical drawing tool used to examine price movements in trending markets. Retracement assumes that the price of a security will rise and fall many times before continuing a major trend. These price fluctuations are known as corrections. These price corrections often retrace prior trends by specific percentages. This retracing of percentages is known as percent retracement. Many analysts believe that price retracement calculations help identify buy and sell opportunities and provide support levels for a market. In order to calculate Percent Retracement, three distinct price points on the chart must be selected:
- Price 1 is the beginning point - a significant high or low.
- Price 2 is the Main point - the opposite high or low point of Price 1.
- Price 3 is the retracement point - the intermediate high or low for which you want to calculate the percent retracement.
Fibonacci Price Retracement Calculator considers the price range between Price 1 and Price 2 to be 100%. It then calculates the difference between Price 2 and Price 3 and divides that value by the difference between Price 2 and Price 1 using the following mathematical formula:
Percent Retracement = [ (Price 2 - Price 3) divided by (Price 2 - Price 1) ]
Draw a Fibonacci Price Retracement Calculation Object
You apply the Fibonacci Price Retracement Calculator drawing object to a chart by three single clicks at three distinct price points on your chart. You specify the three points and your charting application displays the percent retracement calculations. The first point should be a significant high or low. The second point should be the opposite high or low point of the first point, and the third point is the retracement point - the intermediate high or low for which you want to calculate the percent retracement.
- Activate a Chart Analysis window containing a Fibonacci Price/Time Extension Lines object.
- Use the Drawing > Fibonacci Price Retracement Calculator menu sequence.Your pointer will change into a shape of the Fibonacci Price Retracement Calculator icon.
- Click a significant high or low, which will be known as Price 1.
- Click the opposite high or low point of Price 1, which will be known as Price 2.
- Click the retracement point - the intermediate high or low for which you want to calculate the percent retracement (which will be known as Price 3). The Fibonacci Price Retracement Values dialog is displayed showing the calculations for each price point.
- Click Print to print your results, click OK to close the window.
- Optional. Use the Drawing > Snap Mode menu sequence to "snap" the drawing object to the open, high, low, or closing price of the first and last bars the drawing object intersects. For more information, see Snap Mode.