# How to Use Fibonacci Retracements on TradeStation

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Stock prices usually zig and zag instead of moving in a straight line. Today we’ll explore Fibonacci retracements, a popular tool for navigating ups and downs in your trading.

The Fibonacci (“Fib”) tool is a drawing instrument on TradeStation’s charts that draw lines for potential pullbacks. It’s based on a series of numbers discovered by medieval mathematician Leonardo Fibonacci. While the calculations are complicated, their use in the market is relatively straightforward.

## Fibonacci Retracement Levels

Simply put, the Fibonacci trading looks for stocks to give back, or “retrace,” certain amounts of a move. They’re based on percentages of the advance or decline. The Fibonacci tool looks for retracements of:

• 23.6 percent
• 38.2 percent
• 50 percent
• 61.8 percent
• 76.4 percent

Bullish traders can use these countertrend moves to identify pullbacks in an upward-trending stock they’d like to buy. Bearish Fibonacci traders can look for potential rebounds to sell.

## How to Use Fibonacci Retracement

TradeStation users can access Fib retracements on our desktop, web and mobile platforms.

• Click on “Drawing” (marked with a pen icon) to start.
• On the desktop, select “Fibonacci Price Retracement Lines.”
• On the mobile app, tap the pen icon and select the Fibonacci tool. Its icon shows a diagonal line running through a series of horizontal lines.
• On web trading, click the pen icon on the left and select “Fib Retracement.”

After activating the Fibonacci tool :

• Left-click on the starting price level. Release the button.
• Move the cursor to the ending price level.
• Left-click again. This will establish the range.
• You can drag the prices to adjust the top and bottom of the range.

You can adjust the drawing by right clicking on a line and selecting “Edit ‘Fibonacci Retracement Lines.'”

A dialog box will appear. You can easily make some of the following changes:

• Change the colors of the various retracement levels.
• Change the style of the lines (solid, dotted, dashed, etc.)
• Change the line weight (thickness) or transparency of Fib retracement lines.
• Hide lines using the check boxes to the left. (In case your chart is cluttered.)
• Tabs on the left also let you set alerts and change the fonts of the labels.

## Uptrend Fibonacci Retracement

When stocks are trending higher, it’s not always clear where support and resistance might be. How much of a pullback should you expect?

While no indicator is always accurate, Fibonacci trading provides starting points. Simply adding retracement lines to a price chart can help find where buyers may step in.

Take Boeing (BA) for example. The aerospace company languished near its 52-week low in early November amid pessimism about its turnaround. Then management unexpectedly said free cash flow would reach as high as \$2 billion — roughly triple the amount forecast by Wall Street. Buyers immediately jumped in, lifting the stock 25 percent in barely a week. Given the pessimism before the news, traders weren’t sitting on big profits so none of them were quick to sell. The result was a very tight uptrend with few clear entry points.

However, the Fibonacci tool plotted a 23.6 percent retracement at \$168.57. BA tested just \$0.05 below that point before stabilizing and continuing another 20 percent higher. (See the chart above.)

Fib trading could have also applied to the S&P 500’s move since October. See this chart on our TradingView channel, which shows how the index had two 50 percent retracements as it rebounded from a two-year low.

In conclusion, Fibonacci retracements can be a useful tool for active traders in the stock market. Hopefully this article helps get you started with this technical analysis tool.