Definition
The Fibonacci indicator is an mt5 indicator that shows the Fibonacci price levels of higher timeframes on the candlestick chart. It is also known as multi timeframe fibo indicator.
Retail traders widely use the Fibonacci tool in technical analysis to predict high-probability price levels. Usually, fibo 61.8 and 50 levels are perfect; other extension levels are also necessary.
How does the Fibonacci indicator work in MT5?
This MT4 indicator will plot the Fibonacci levels of higher timeframes, like daily timeframe, on the lower timeframes, like 15M and 30M. Higher timeframes are easy to trade and less noisy. Therefore, we will use the higher timeframe for prediction and then trade on the lower timeframe for trading.
When you add the Fibonacci indicator to the chart, you can add the higher timeframe according to your strategy. I will suggest choosing the daily timeframe because it has a high winning ratio in trading.
If you are a scalping trader, I recommend you choose the 30M, 45M, and H1 timeframe.
How to trade with the Fibonacci indicator in MetaTrader 5?
First, you should understand that the Fibonacci indicator only draws the price levels based on a mathematical formula. It will not generate buy or sell signals. However, I will explain a little bit about trading with this indicator.
Open a buy trade
The price zone between 50 and 61.8 is known as Fibonacci golden zone. We will use this golden zone to open a buy trade. For example, if you have added the indicator on the daily timeframe, wait for the price to retrace to the golden zone on lower timeframes like 30M or 15M. Then open a buy trade from the Fibonacci golden zone with confirmation of a bullish candlestick pattern
Open a sell trade
When the Fibonacci indicator plots the golden zone on the bearish candlestick of the higher timeframe, then wait for the price to retrace to the golden zone on the lower timeframe. Then open a sell order with confirmation of a bearish candlestick pattern.
Conclusion
The Fibonacci MT5 indicator is a mandatory tool for retail traders who use the MetaTrader 5 platform because it will help you find the market’s key levels.