Fibonacci Bands

Description

This indicator dynamically calculates Fibonacci retracement levels based on the highest high and lowest low over a specified lookback period. The key Fibonacci levels (0.236, 0.382, 0.5, 0.618, and 0.786) are plotted on the chart, with shaded areas between these levels for visual guidance.

How it works

• The script computes the highest high (hh) and the lowest low (ll) over the defined length.
  

• It calculates the price range (delta) as the difference between the highest high and the lowest low.
  

• Fibonacci levels are then determined using the formula: ℎℎ − (delta × Fibonacci ratio)

• Each Fibonacci level is then plotted as a line with a specific color.
  

Key Features

• Customizable Length: Users can adjust the lookback period to suit their trading strategy.
  

• Multiple Fibonacci Levels: Includes common Fibonacci retracement levels, providing traders with a comprehensive view of potential support and resistance areas.
  

• Visual Fillings: The script includes customizable shading between levels, which helps traders quickly identify key zones (like the "Golden Zone" between 0.5 and 0.618).
  

Unique Points
Fibonacci Focus: This script is specifically designed around Fibonacci retracement levels, which are popular among technical traders for identifying potential reversal points.

Dynamic Range Calculation: The use of the highest high and lowest low within a user-defined period offers a dynamic approach to adapting to changing market conditions.

How to use it

• Adjust the length parameter (default is 60) to determine how many bars back the indicator will calculate the highest high and lowest low. A longer length may provide a broader perspective of price action, while a shorter length may react more quickly to recent price changes.
  

• Observe the plotted Fibonacci levels: 0.236, 0.382, 0.5, 0.618, and 0.786. These levels often act as potential support and resistance points. Pay attention to how price interacts with these levels.
  

• When the price approaches a Fibonacci level, consider it a potential reversal point. The filled areas between the Fibonacci levels indicate zones where price might consolidate or reverse. The "Golden Zone" (between 0.5 and 0.618) is particularly significant; many traders watch this area closely for potential entry points in an uptrend or exit points in a downtrend.