Fibonacci Retracement Reversal Strategy

Markets often retrace a portion of a prior move before resuming trend. This strategy identifies recent swing highs and lows and watches for price to test the 61.8% or 78.6% retracement levels. These areas frequently mark exhaustion points.

Testing indicates an average annual return of about 115%. It performs best in the stocks market.

The algorithm tracks swings over a rolling window and calculates Fibonacci levels between them. When price nears a key retracement and forms a candle in the direction of the original trend, a trade is opened with a stop placed a set percent away. Targets are around the 50% midpoint of the swing.

By focusing on deep pullbacks within an existing trend, the method aims to capture the early stages of a continuation move after sellers or buyers have briefly taken control.

Details

• Entry Criteria: Price tests 61.8% or 78.6% retracement and prints a confirming candle.
• Long/Short: Both depending on trend.
• Exit Criteria: Price reaching the 50% level or stop-loss.
• Stops: Yes, percentage based.
• Default Values:
  • SwingLookbackPeriod = 20
  • FibLevelBuffer = 0.5
  • CandleType = 5 minute
  • StopLossPercent = 2
• Filters:
  • Category: Trend following
  • Direction: Both
  • Indicators: Fibonacci levels
  • Stops: Yes
  • Complexity: Advanced
  • Timeframe: Intraday
  • Seasonality: No
  • Neural networks: No
  • Divergence: No
  • Risk level: Medium