Auto Fibonacci Extension: Levels Drawn for You

What it shows

Two dashed legs joining the three swing points (the first leg red, the second green), then horizontal level lines starting at the second point, each with a label showing the ratio and the price. A pale band is filled between 0.5 and 0.618 by default.

How Pravex works it out

1. Find swing points with a zigzag. A bar counts as a swing high when no bar within half the swing size on either side has a higher high (a swing low works the same way on lows). A swing size of 10 therefore looks 5 bars each way.
2. Keep a swing only if the move from the previous swing is big enough. The size is fixed at 3 × ATR(10) as a percentage of the closing price, so a quiet market needs a smaller move than a wild one. A swing of the same kind as the last one replaces it when it goes further, so highs and lows alternate.
3. The last bars after the final confirmed swing also count: the running extreme is turned into a live point as soon as it passes that size, so the drawing follows the swing that is still forming.
4. Take the last three points: A, B and C. The move is B minus A, in price. With the direction flipped it is A minus B instead, which flips the projection to the other side.
5. Each level sits at: C + move × ratio. The ratio 0 is C itself, 1 repeats the first move from C, 1.618 goes 1.618 times as far. Negative ratios land on the other side of C.
6. The lines start at B’s bar. With the lines extended to the right they run to the right edge; without that they stop after as many bars past C as the first leg is long.

Settings

Setting	Default	What changing it does
Swing size (candles)	10	The swing window. A swing high needs the highest high within half this many candles on each side. A larger number finds fewer and bigger swings, so the three points sit further apart; a small one picks up every wiggle.
Flip the direction	off	Measures the first move the other way round (A minus B), so the levels are projected against the direction of that first leg instead of with it.
Extend lines left and right	off, on	The first box runs the level lines to the left edge of the chart. The second (on) runs them to the right edge, past the latest candle; with it off they stop a little after the third point, as many candles past it as the first leg is long.
Price on each level	on	Adds the price of the level in brackets to its label.
Ratio on each level	on, Values	Adds the ratio to each label. The second box switches the ratio between Values (0.618) and Percent (61.8%).
Label side	Left	Puts the labels at the left end of the level lines or at the right end.
Fill transparency	85	How see-through the filled bands are, from 0 (solid) to 100 (no fill at all). At 85 the fill is faint.
Fill only the 0.5 to 0.618 band	on	Fills just the band between the 0.5 and 0.618 levels. Off fills the gap between every pair of neighbouring levels, each in the colour of the level further from 0. After this box come 22 level rows, each with a tick box and a ratio you can type over (ticked by default: on: 0, 0.236, 0.382, 0.5, 0.618, 0.786, 1, 1.618, 2.618, 3.618, 4.236; off: 0.65, 1.272, 1.414, 1.65, 2.65, 3.65, 4.618, -0.236, -0.382, -0.618, -0.65). Only ticked rows are drawn, sorted by ratio.

How traders read it

Traders use the extension levels as places where a move might stall. The 1 level is the simplest to understand: the second swing repeated by the same distance. 1.618 is the one people quote most.

Say the first leg (numbers made up for the example) runs 40 points and the third point sits at 2,400. The 1 level is at 2,440 and 1.618 is at 2,400 + 40 × 1.618, about 2,465. With the direction flipped, the same maths gives levels below the third point.

The line is a reference, not a signal. Look at what price does when it gets there: a quick rejection and a slow grind through are two different stories.

When it misleads

The three points are chosen by the zigzag, not by you, and they change as new bars arrive: the third point is a live running extreme, so the whole drawing can jump when a new swing prints. The levels are only as good as the leg they are measured from, and a different swing size gives a different leg and a different set of lines. On gold the 3 × ATR size filter keeps the points sensible, but the pattern appears everywhere, so do not treat a level as a prediction just because it lines up with a candle.

Questions and answers

How does Auto Fib Extension choose its points?

It runs a zigzag over the candles and takes the last three swing points. A swing has to be the extreme of half the swing size on each side and has to move at least 3 × ATR(10) from the previous swing.

Why does my extension ladder move when a new candle prints?

The third point is the latest running extreme, so it follows price until a swing is confirmed by the candles after it. The levels are measured from that point, so they move with it.

What is the difference between Fib Extension and Fib Retracement?

Retracement draws levels between two points, so it shows where a pullback might end. Extension needs three points and projects levels beyond the third, so it shows where the next move might reach.

What does flipping the direction do?

It flips the sign of the first move, so the levels are drawn the opposite way from the third point. Use it when you want the projection against the first leg.

Which extension levels does it show by default?

0, 0.236, 0.382, 0.5, 0.618, 0.786, 1, 1.618, 2.618, 3.618 and 4.236. Eleven more rows, including negative ratios, are there to tick on.

Related: Auto Fib Retracement, Auto Pitchfork, Pivot Points High Low, every indicator.