Lesson 6 | Two Drawing Tools: Fibonacci Retracement and Percentage Lines

In one sentence

The system uses just two tools: Fibonacci retracement to measure 1.382, and percentage lines to cast nets and draw rhythm lines. Always anchor on the exact high and low.

Fibonacci retracement: add two levels

Most platforms ship the Fibonacci tool with 0, 0.236, 0.382, 0.5, 0.618 and 1. Add two levels in its properties.

You can remove the levels in between. The cleaner the chart, the better. Whether you drag left to right or right to left, 1.382 lands in the same place; what matters is the right start and end points.

Percentage lines: the main tool

Percentage lines cut a move into proportions. They are the main tool for casting nets and drawing rhythm lines (Lesson 11 goes into detail). Drawing them is simple: anchor from one point to another.

Anchoring: where most errors happen

Whether a line is accurate depends entirely on whether both ends are anchored.

• Platforms with snapping (several Chinese futures platforms, for example): hold Ctrl while dragging and the line snaps to a candle's open, close, high or low. Usually you anchor to the high or the low.
• MT4 there is no snapping. After drawing, double-click the line, open its properties and type in the exact high and low prices of the two candles.
• Wicks count as price. Anchor at the tip of the wick, not the body.

An analogy

Measuring is like measuring someone's height. Zero has to sit at the soles of the feet and the other end at the top of the head. One centimetre off at the feet and every mark after it is one centimetre off. On gold, five dollars off is 500 dollars per lot.

Setting up Fibonacci in MT4 (illustration)

1. Insert → Fibonacci → Retracement, and drag across a move.
2. Double-click the lines → right-click Properties → the Fibo Levels tab.
3. Click Add twice and enter 1.382 and -0.382, with the same numbers as descriptions.
4. Delete levels you don't need and click OK.
5. Save it as a template (the MT4 tutorial covers templates) so every chart has it.

The most common mistakes

1. Anchoring on the body. The start or end sits on the open or close and misses the wick.
2. Drawing at random. Start and end points without a reason make the 1.382 meaningless. Lesson 7 covers how to choose the start.
3. Adding too many levels. A dozen lines on a chart make everything look like resistance and nothing clear.

Explain it in your own words

1. Which two levels do you add to the Fibonacci tool?
2. Why anchor at the tip of the wick?
3. MT4 has no snapping. How do you make a line exact?

Practice

Set up the Fibonacci tool in MT4 (or your platform), add 1.382 and -0.382 and save a template. Then pick five clear moves on the gold daily chart and practise anchoring, zooming in each time to check both ends sit on the wick tips.

Previous: Lesson 5 | How to study this course　Next: Lesson 7 | ABCD and 1.382: trends start from a first shape

This course teaches a method using past price action as examples. It does not forecast prices, recommend any broker or give investment advice.