fibonacci-trading

Fibonacci Trading

Fibonacci levels identify high-probability zones where price tends to react — for entries on pullbacks and targets on extensions.

Prerequisites

No dependencies required. Just provide a swing high and swing low price — Claude calculates all Fib levels instantly. Enhanced with Groww MCP (auto-identifies swings from candles) or yfinance.

Data Needed

1. Swing high and swing low: From fetch_historical_candle_data or user-provided prices
2. Current price: get_quotes_and_depth from Groww, or user-provided
3. For precise calculation, you can compute in Python: ```python diff = swing_high - swing_low levels = { "23.6%": swing_high - diff * 0.236, "38.2%": swing_high - diff * 0.382, "50.0%": swing_high - diff * 0.500, "61.8%": swing_high - diff * 0.618, "78.6%": swing_high - diff * 0.786, } ```

Retracement Levels (Entry Zones)

After a significant move up, price often pulls back to these levels before continuing:

| Level | Character | Trading Implication | |-------|-----------|-------------------| | 23.6% | Shallow pullback | Strong trend — buyers eager, enter aggressively | | 38.2% | Normal pullback | Healthy trend — standard entry zone | | 50.0% | Deep pullback | Trend weakening but viable — enter with caution | | 61.8% | Golden ratio | Last stand for the trend — high reward if it holds | | 78.6% | Very deep | Trend likely failed — avoid or use tight stop |

For downtrend retracements (price bouncing up):

Same levels but inverted — measure from swing high down to swing low.

Extension Levels (Profit Targets)

After a retracement completes and price resumes the trend:

| Level | Use | |-------|-----| | 100% | Measured move — equal to the prior swing | | 127.2% | Conservative target — good for partial profit | | 161.8% | Standard target — most common for swing trades | | 200.0% | Extended target — for strong trends | | 261.8% | Full extension — rare, only in powerful moves |

Calculating Extensions

# For uptrend: price resumed from point C (retracement low)
ext_127 = C + (swing_high - swing_low) * 1.272
ext_161 = C + (swing_high - swing_low) * 1.618
ext_200 = C + (swing_high - swing_low) * 2.000

How to Draw Fibs

1. Identify the swing: Find the most recent significant high and low (at least 5% move)
2. Direction matters:
3. Uptrend retracement: Anchor at swing low, drag to swing high
4. Downtrend retracement: Anchor at swing high, drag to swing low
5. Use the right swing: The most recent completed swing, not one still in progress
6. Multiple swings: You can draw Fibs from different timeframes. When levels from different swings overlap, that's a confluence zone (very strong).

Confluence Zones

The most powerful Fibonacci levels are where they align with other technical factors. These zones have the highest probability of price reaction.

| Confluence Combination | Strength | |-----------------------|----------| | Fib level alone | Moderate | | Fib + horizontal S/R | Strong | | Fib + moving average (SMA50/200) | Strong | | Fib + trendline | Strong | | Fib + S/R + MA | Very strong | | Fib from multiple timeframes overlapping | Very strong |

Practical Examples

• Fib 38.2% from daily swing aligns with SMA50 → strong buy zone
• Fib 61.8% from weekly swing aligns with horizontal support from 3 months ago → high-probability entry
• Fib extension 161.8% aligns with a round number (Rs.2,000) → likely profit target

Fibonacci Trading Rules

1. Don't use Fibs in isolation — they work best as confirmation alongside S/R, volume, and indicators
2. Zone, not line — treat each level as a zone (±1-2%), not a precise price
3. Wait for reaction — don't blindly buy at a Fib level. Wait for a reversal candle (hammer, engulfing, etc.)
4. Strongest entries: Fib 38.2% to 61.8% zone in a healthy trend with volume confirmation
5. If 78.6% breaks: The trend is likely over — exit or reverse