Bollinger Bands - Fibonacci Ratios Technical Analysis and Forex Trading Signals
Derived from the original Bollinger bands.
The Bollinger Fibonacci ratios is a volatility based indicators but it does not use the standard deviation to calculate the width of the bands instead it uses a smoothed ATR that are multiplied with Fibonacci ratios of 1.618, 2.618, and 4.236.
The smoothed lines that are multiplied with Fibonacci ratios are then added or subtracted from the moving average.
This forms 3 upper Fibonacci bands and 3 lower Fibonacci bands
The middle band forms the basis of the trend.
Technical Analysis and Generating Signals
This indicator used to determine point of support and resistance for a currency pair.
The lines below represent support points while those above are resistance levels.
The outermost bands provide the strongest resistance/support.
The inner most bands provide least support/resistance.
The innermost band represents Fibonacci 38.2 % retracement level
The second band represents Fibonacci 50 % retracement level
The outermost band represents Fibonacci 61.8 % retracement level
The Indicator is used to determine points where price might reverse. (Price Pullback Levels)
When price hits one of the lines and reverses then an entry or exit signal is generated.
However, it is always good to combine the signal with other confirmation indicators such as the moving average to confirm the signal as shown below.