Using ZigZag Swings to Plot Fibonacci Support and Resistance Levels

Summary

The Fibo ZigZag indicator identifies successive price highs and lows, measures the distance between them, and plots retracement percentages from the swing extremes. The listed levels are 23.6%, 38.2%, 50%, and 61.8%. It is described as a revised version of the standard ZigZag, with calculations made after a local maximum or minimum is completed.

The suggested uses include locating possible support and resistance, planning stop-loss and take-profit levels, and taking partial profits. The text also mentions relevance to the Joe DiNapoli approach and possible use of levels for averaging strategies. Three settings govern swing detection and revision: candle depth for finding highs or lows, minimum deviation in points, and the number of extrema considered for recalculation. No market examples, validation, or performance results are supplied. Since the method depends on completed swings and recalculation settings, the description alone does not establish the reliability or timing of levels as trading signals.

Key ideas

• The indicator finds successive highs and lows and measures the distance between them.
• It plots retracement levels at 23.6%, 38.2%, 50%, and 61.8% of the swing distance.
• The levels are proposed for support and resistance analysis and trade management.
• Depth, minimum deviation, and backstep settings affect swing identification and recalculation.
• The document supplies no empirical evidence that these levels predict price behavior.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.