With Fibonacci Arcs, you can try to identify support and resistance levels at the so-called Fibonacci levels of 38,2%, 50% and 61,8%. The arc lines can be shown as a half circle or full circle.
To draw Fibonacci Arcs, you need two reference points (A and B) that define the base line. Both reference points are positioned at recent consecutive pivots (for example, a high and the following low). The vertical distance between the two reference points (shown as an auxiliary blue dotted line on the picture below) is divided into the Fibonacci levels. The arc lines are then drawn from point B with the radii of the resulting distances.
All Fibonacci drawing tools are based on the belief that the price development of securities is related to the numbers of the Fibonacci sequence, a mathematical series of numbers that was discovered in the twelfth century, and the so-called Fibonacci levels, which are derived from the ratios of consecutive Fibonacci numbers. Fibonacci numbers and Fibonacci ratios also appear in nature, for example in the arrangement of leaves in a sunflower, and in the golden ratio, which is used for example in architecture and paintings.
You can show the arc lines as a full circle rather than as a half circle. Additionally, you can choose which levels are displayed, customize the ratios used to calculate the levels, change the line style for the arc lines, and show / hide the labels for each level: See Customizing Fibonacci Arcs.
▪ Click on the Fibonacci Arc icon on the Drawing toolbar:
▪ Click on the chart at the first reference point of your base line (A) and hold the mouse button down.
▪ Move the mouse pointer to the second reference point of your base line (B) and release the mouse button.
You can hide some of the arc lines: See Hiding and Showing Lines / Levels with Visibility Points.